NAPERVILLE, Ill., Jan 11 (Reuters) - Chicago corn futures are trading at decade highs for the time of year while soybeans are at their highest ever for the date, creating some vulnerability ahead of the U.S. Department of Agriculture’s data onslaught.
The agency’s reports, due on Thursday at noon EST (1700 GMT), can cause wild swings in CBOT futures if industry analysts have incorrectly anticipated key numbers. The ever-important U.S. corn crop may be most primed for a market miss due to an alarmingly low range of guesses.
CBOT futures’ report day reactions are most closely linked to U.S. corn and soybean production outcomes, and U.S. quarterly stocks are likely the second layer of interest. Last year, analysts practically nailed all those numbers, leading to quieter trade.
But this year, analysts have allowed for a 156 million-bushel range on the 2022 U.S. corn harvest, the smallest for the January report in 16 years. That range is only a third as large as the five-year average and is driven by narrow guesses in both area and yield.
Analysts peg the 2022 U.S. corn crop at 13.933 billion bushels, basically unchanged from the prior forecast. The soy crop is seen at 4.362 billion bushels, up 20 million from November. The 115 million-bushel range in soy production is dead on the five-year average for this report.
U.S. YIELDS
Analysts’ range on U.S. corn yield is a seven-year low and for soybeans it is at least a 13-year low. Corn and soy yield are seen at 172.5 and 50.3 bushels per acre, respectively, up from 172.3 and 50.2 in November.
U.S. farmers did not have a banner corn crop primarily because of drought in western areas. But that has no bearing on whether January corn yield is higher or lower than in November, as past outcomes in poor-yielding years are evenly split.
But the November-January soy yield tendency is very strong with a near 90% chance of a higher yield in January when yields were already below trend. That somewhat validates the trade assumption.
However, analysts’ miniscule changes versus the November yields are very uncommon, but not unprecedented. The 2021 corn yield last January was unchanged from November, but otherwise the trade is looking for the smallest January move in corn yield in 14 years. The soy yield shift would be a 15-year low.
In the last decade, January corn yield differed from November by less than 1 bpa only three times: for the 2015, 2016 and 2021 crops. The maximum November-January difference for soybeans was 0.5 bpa, occurring three times in the last 10 years.
The November-January bean yield trend is split over the last decade, increasing and decreasing five times each. Corn yield was lower in January versus November in six of the last 10 years.
QUARTERLY STOCKS
Analysts expect U.S. corn stocks on Dec. 1, the end of the first quarter of 2022-23, at a nine-year low of 11.153 billion bushels and down 4% from the previous year. Dec. 1 soybean stocks at 3.132 billion bushels would be down fractionally from the prior year and up 6% from two years ago.
U.S. wheat stocks as of Dec. 1, the halfway point of 2022-23, are seen at a 15-year low of 1.344 billion bushels. That is down 2.5% on the year but down an average of 29% versus the prior five years.
Analysts are on a four-year streak of lowballing the Dec. 1 soy number, though they were too high in the six years prior to that. The trade is on a three-year streak of over-guessing Dec. 1 wheat stocks after having been too low in the seven previous years.
The recent Dec. 1 corn bias has been mixed and is skewed by a huge over-estimation two years ago, which was when USDA was making significant adjustments to past quarters’ corn stocks. A large cut to March 1 stocks was made in June 2022, but the prior four quarters had featured negligible adjustments.
ENDING STOCKS
Since U.S. corn production is seen largely unchanged, analysts must be reducing 2022-23 U.S. demand based on an average 57 million-bushel increase in their corn ending stock estimate. The prediction of 1.314 billion bushels is 63 million smaller than in 2021-22.
U.S. corn-based ethanol production fell off significantly amid a frigid winter storm in December, and U.S. corn export demand has been very slow.
The predicted 16 million-bushel rise in 2022-23 U.S. soybean ending stocks to 236 million bushels is mostly in line with production estimates, implying little to no changes anticipated for demand. That compares with 2021-22 ending stocks of 274 million bushels.
WINTER WHEAT
The trade pegs U.S. winter wheat plantings at a seven-year high of 34.485 million acres, reasonable considering prices at planting were at 10-year highs for the date. But the recent trade bias might suggest an even larger area.
Between 2000 and 2019, analysts under-guessed winter wheat seedings only three times (2011, 2012 and 2018), but now their estimates are on a three-year streak of being too low.
SOUTH AMERICA
Argentina’s crops remain under traders’ lenses as severe drought threatens yields for a second straight year. Analysts see Argentina’s soybean crop at 46.7 million tonnes, down from USDA’s 49.5 million in December.
That is almost exactly what happened last January, when USDA reduced the soy harvest to 46.5 million tonnes from 49.5 million a month earlier. That 6% decline in January 2022 was the sharpest, earliest change to Argentina’s beans that USDA had made in well over a decade.
Argentina’s corn crop is seen falling more than 5% to 52 million tonnes from 55 million in December. Last January, USDA reduced the corn harvest to 54 million tonnes from 54.5 million, and that compares with a final of 51.5 million tonnes. Karen Braun is a market analyst for Reuters. Views expressed above are her own. (Reporting by Karen Braun Editing by Matthew Lewis)
