Farmers Cooperative : Jan 12, 2017 Today’s infamous January USDA report lived up to its reputation.… more

Today's infamous January USDA report lived up to its reputation. After the dust settled at the 1:20 p.m. close, corn gained a penny and soybeans closed 28 cents higher. Wheat was also a benefactor of the report, closing 7 cents stronger. There was a lot of new data to digest between final production estimates from harvest '16, supply & demand numbers to start the new year, and updated quarterly stocks. As expected, the market was busy chewing through it all and the result was a nice bump in our commodity space (particularly for soybeans).

Here's how it played out:

Much of the bullish reaction in soybeans was 'supply-driven'. The S&D balance sheet showed a drop in soybean ending stocks by 60 mln bushels (480 mln bu in Dec to 420 mln bu in Jan). This was the 'spark' that started the rally. The interesting thing about the adjustment lower was that it was entirely driven by the 'supply side' of the balance sheet. The USDA dropped planted acreage from 83.7 mln acres to 83.4 mln acres (which also dropped the harvest acreage by 300,000 acres). Additionally, the national soybean yield was dropped by .4 bu/acre to a final yield of 52.1 bu/acre. This dropped production by 54 mln bu., imports dropped by 5 mln bu., resulting in a drop in total supply of 60 mln bu. While the drop in ending stocks to 420 mln bu. caught many off-guard, this is still a 'healthy' carryout. The 'demand' side of the balance sheet remained mostly unchanged this month (remember - we already have record export and crush numbers on the books). Unless the supply/demand landscape for beans changes drastically, it is difficult to build a case for increased demand for American soybeans in the next 3-6 months. This could happen if we get some support from outside markets (weaker dollar, firmer palm oil) or if we get a scare out of South American - but the current landscape would not suggest that.

For better or worse, there weren't many surprises in the report for corn. Total production dropped by 78 mln bu. due to drops in yield and acres. Final yield for harvest '16 came in at 174.6 bu/acre (a record by 3.6 bu/acre vs. 171 from harvest '14). Iowa led the pack with a final yield of 203 bu/acre. National production was a record at 15.148 bln bu. Feed usage dropped by 50 mln bu and ethanol grind increased by 25 mln bu. The net effect of the drop in production and drop in demand was a 48 mln bu. drop in ending stocks to 2.355 bln bu. Exports are at near-record levels and ethanol grind estimates are at record levels (and growing). Most of the report results were within trade estimates which is why we didn't see much of a price reaction in corn futures.

With this report now behind us, the market will turn it's full focus upon South American growing conditions. The current outlook is mostly favorable with some small concerns surrounding pockets of over-abundant moisture in Argentina.

Have a good afternoon.

USDA January WASDE Results: