Bullish report for Jan. 12

By Doug Tenney, Leist Mercantile

Corn stocks were less than expected. Corn production was below trade estimates.

Plenty of changes were expected with this USDA report. The January USDA report today has been called one of the most important USDA report days for the entire year. This report details final U.S. corn and soybean for 2020. In addition, quarterly U.S. grains stocks were released. U.S. corn and soybean demand was expected to increase. South America corn and soybean production changes were expected for both Brazil and Argentina.

U.S. corn and soybean ending stocks along with South America corn and soybean production were the main features with this report. World grain ending stocks were closely watched as well.

Corn ending stocks were 1.502 billion bushels, last month was 1.702 billion bushels. Soybean ending stocks were 140 million bushels, last month was 175 million bushels. Wheat ending stocks were 836 million bushels, last month at 862 million bushels. Soybean crush was up 10 million bushels, soybean exports up 30 million bushels. Corn exports and ethanol each declined 100 million bushels.

U.S. corn 2020 production was 14.182 billion bushels, last month 14.507 billion bushels. U.S. soybean production in 2020 was 4.135 billion bushels, last month was 4.170 billion bushels.

Brazil soybean production was 133 million tons, last month was 133 million tons. Argentina soybean production was 48 million tons, last month was 50 million tons.

The average trade estimate for U.S. grains ending stocks were: Corn 1.599 billion bushels, soybeans 139 million bushels, wheat 874 million bushels.

Shortly after the report was released, corn was up 20 cents, soybeans up 33 cents, and wheat  up 23 cents. Just before the report release, corn was up 1 cent, soybeans ups 15 cents, and wheat up 9 cents. 

Look at the speed of this soybean price rally in the past two months. The $12 mark proved to be substantial price resistance as that level was challenged at least seven times from mid-November to mid-December. It finally closed above $12 on Dec. 17 at $12.05 ½, up 17 ½ cents. The next huge price barrier was at $13. On December 30, March CBOT soybeans closed at $13.00 ½, up 4 ½ cents. It took a month to close above $12, yet less than two week later March CBOT soybeans closed above $13. In addition, March CBOT soybeans made new contract highs on four days last week.

The last USDA monthly report was on Dec. 10. March CBOT corn on that day closed at $4.21 ¼, down 2 ½ cents; last night it closed at $4.92 ¼ for a gain of over 70 cents in a month. March CBOT soybean closed that same December day at $11.58 ¾, down 4 ¾; last night it closed at $13.72 ½ with a gain of $2.14 this past month.

Soybean demand rationing and the lack of, has been a huge price driver the past several months. Estimates project that U.S. farmers have already sold 90% to 95% of the 2020 soybean production. That has been instrumental to push soybean prices to current levels. Once soybeans hit the $12 level, virtually zero hedge or selling pressure was a feature in the face of end user and speculative buying sprees on multiple occasions in recent weeks.

What have been the weather realities in South America this past month? Less than normal rainfall for Brazil and Argentina, temperatures above 90 degrees, along with plant stresses already present a month ago.

Look for demand rationing to continue. If soybean prices today were to drop multiple dimes, don’t be surprised if end user pricing takes place.

In the weeks ahead, U.S. weather will become a feature as the market will focus more on 2021 fall corn and fall soybean prices.

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