The report was bearish for corn and soybeans with production and ending stocks higher than expected. Before the report corn was down 3 cents, soybeans up 2 cents, and wheat was unchanged. At 12:20 pm corn was down 11 cents, soybeans down 20 cents, while wheat was down 8 cents.
Overall traders were expecting corn yields to be reduced ever so slightly and ending stocks to be unchanged due to feed usage being reduced. Corn fed to livestock was unchanged. High stocks of feed quality wheat continue to be in strong competition with corn in which ingredient gets fed to livestock in coming months.
Many expected soybean production to increase as the U.S. yield climbed higher. Higher production without demand changes would increase ending stocks. Traders were expecting the soybean yield to increase at least one bushel per acre. In addition, soybean exports did increase 25 million bushels as expected.
U.S. corn production was estimated at 15.226 billion bushels with a yield of 175.3 bushels per acre. Ending stocks were estimated at 2.403 billion bushels. All numbers were above trade expectations and also above last month. Production last month was 15.057 billion bushels and ending stocks were 2.320 billion bushels.
Corn has seen support this week due to Brazil buying at least two cargoes of US corn. Brazil has been buying corn in an effort to ease supply shortages. They are expected to plant more corn this year than last year.
This month USDA pegged the U.S. soybean production at 4.361 billion bushels with an average yield of 52.5 bushels per acre. Ending stocks were estimated at 480 million bushels, considerably above trade expectations of 420 million bushels. Last month USDA estimated the U.S. soybean production at 4.269 billion bushels with a yield of 51.4 bushels per acre. Ending stocks were 395 million bushels.
Today’s report will be the last corn and soybean production report for calendar 2016. There will be a monthly supply and demand report on Dec. 9 but that report will not see any changes to the 2016 corn and soybean production estimates. The final production report for 2016 corn and soybeans will be January 12, 2017. On that same day USDA will release its quarterly grain stocks report as of December 1, 2016.
The grain markets have been in a huge tug of war since early October, swaying between demand and supply. The month of October seemed to focus on corn and soybean demand. Once the calendar clicked to November, supply and thoughts of record U.S. corn and soybean production once again moved to the head of the line. Obviously record corn and soybean production is not new news. However, renewed stories of new record production kept corn and soybeans defensive this past week. Keep in mind that October brought several new records of weekly soybean exports from the U.S. as they hit 100 million bushels in the past two weeks. That number is a big deal as in previous fall harvest seasons the U.S. has struggled to see that 100 million bushel mark exported when totaling corn, soybean, and wheat exports.
Today’s USDA report pales in comparison to the news of the past twelve hours with the election of Donald Trump as the next president. It could be compared to standing at the summit of Mt. Everest and viewing the first of many base camps thousands of feet below it. You can barely see the details of the base camp from the summit. His election is being called, “historic,” and its huge surprise and awe are comparable to the British Brexit vote on June 24.
Early and surprising hints last night of Donald Trump possibly winning the election did send the markets into a tailspin last evening as the Dow was down over 700 points before midnight. Soybeans were down 17 cents last evening with corn down nearly seven cents. In trading this morning the Dow returned to the plus side while corn and soybeans were steady to higher. Why the downdraft on this kind of news? Anytime there is market uncertainty it is “risk off” and “getting out of the way.” “Getting out of the way,” brings selling into the picture. The markets like stability. When there are periods of uncertainty, it means the markets don’t know everything. The stock and grain markets know what they get if Hillary Clinton is president. But with Donald Trump as the new president, markets don’t know with great certainty what he brings to the table, at least not yet.
Traders will continue to watch South America for their corn and soybean production in the next six months. Soybean production in Brazil is certain to pass last year’s 96.5 million tons. Argentina officials see their 2016-17 corn production at 44.5 million tons. Last year the Argentina corn production was just 28 million tons. That low production number helped push US corn exports higher the past six months.
South America weather will also catch the attention of traders and producers in the months ahead. The Brazil weather outlook shows mostly normal weather in the weeks ahead. However, Argentina is seeing lots of rain and may be too wet this week. This pattern follows the same pattern seen a year ago at this time when northern Brazil was dry, while southern Brazil and Argentina were getting too much rain. The weather patterns will bear watching closely.
With grains down so hard today, it is a surprise when demand seemed so good. Supply and large production numbers will dominate in the weeks ahead. We will continue to trade the large production numbers and focus less on demand in the weeks ahead. December CBOT corn is currently in a sideways to up mode. The trend changes if we close below $3.37. At 12:20 pm December CBOT corn was $3.43. January CBOT soybeans at that same time were $9.81, also sideways to up, with the trend changing lower if they close below $9.77.
Nobody said it was going to be easy marketing grain this year. Today’s report brings that notion back to reality.