USDA Report Day November 9, 2023

Market Movers: USDA Report Day 

USDA issued the monthly supply/demand report today. November’s changes are typically more muted than prior months. Production estimates were made from surveys of 5,800 producers and a third month of in-field objective analysis. The next production change will be delayed until the January 12 Annual Production Summary.

Corn:

Ending stocks were raised on this report, 2.111 billion bushels last month to 2.156. This was just over the trade expectation of 2.129 (ALDL 2.100). A 1.9 bpa yield increase was noted, now 174.9. This was over the 173.2 trade estimate (ALDL 173.3). Compared with the starting USDA view of trend this year, this is only -3.6%. The prior four years held minor yield deviations from trend as well, -1.6% to -4.9%. With no change in acreage production was increased by 170 million bushels. This was a bearish report but USDA was quite active with demand offsets totaling 125 million. Feed/residual was raised by 50, a normal offset given the production increase. Corn for ethanol was raised by 25. Given the first six weeks of the marketing year did not see the normal production dip for maintenance this is reasonable. The highly volatile export guess was raised by 50 on this report. USDA’s prior annual goal for exports, 2.025 billion, would have required sales through August to run 1% over the five year average pace. The two most recent weeks of sales would be under this at -14% and -6% vs. average. But the US does have a light price advantage with Brazil. This new increase in their goal, 2.075 billion, now requires remaining sales to run 5% over average. That might be a little aggressive. The grain trade has been scrambling to find a reason to avoid this year’s troubling US supply situation. This report did not help. Anything over 1.8 billion bushels suggests economic value under 410 for futures. But the market is balancing a bearish US balance sheet with concerns over South American weather. Argentine rains have removed that country from the risk category. Brazil, actively planting the small 1st crop, has taken its place though. The trade is also concerned current weather concerns here for 1st crop may last long enough to impact planting of the big 2nd crop starting January. We would see a reasonable downside target at 430.

The world balance sheet showed a minor increase in stocks, from 312.4 million tonnes to 315.0. USDA left its prior views on South American crops unchanged today. Argentina is left at 55 million tonnes and Brazil 129.0. Conab this morning made a light change to their corn estimate, from 119.4 mt to 119.1. They are assuming lower planted acres than USDA. It is not unusual for USDA to be conservative with SA crop concerns so early in the year. No changes were made to USDA’s 277.0 mt China corn production estimate. China’s government is at 288.2.

Soybeans:

2023/24: Ending stocks were raised from last month’s 220 million bushel to now 245. This was over the 221 trade estimate (ALDL 231). A 0.3 bpa increase was added to yields, now 49.9. This represents a 4.0% decline from USDA’s view of starting yields. The prior four years saw anywhere from -4.2% to +2.4% from starting trend. The trade estimate for yields was for no change at 49.6 (ALDL 49.8). USDA added 25 million bushels to production from last month. We were a little surprised to see USDA made no real changes for a demand offset. The small miscellaneous use category, residual, was raised by 1. USDA left their 2.300 billion crush goal unchanged. This should have been raised. Their goal for the year is a 4.0% increase. The first crush report for September was +4.3%. With Brazil’s problems, and recent confirmed increase in Chinese buying, the trade would be interested in their view of US exports. Before the past two weeks we have held clear concerns of US soybean exports. The US faced a clear price disadvantage with Brazil and Chinese buyers had not shown any real interest. But Chinese buyers have purchased a significant 3.0 million tonnes in overnight sales from Friday through today. The US is still not out of the woods on this export story though. Even including these purchases, to be recognized on next Thursday’s weekly report, we’ll need to see remaining sales through August run -7% from the five year average pace. We had four weeks of sales at -4% from average then this week’s big purchases. You could argue this export number should have been raised a little. One clear sticking point is that Brazil’s current pricing is still better than the US. Brazil’s export bid on Wednesday ranged from $43 per tonne cheaper for immediate delivery to $53 for extended delivery. The soybean balance sheet still has a lot of sway in the coming months. Much of this obviously comes from Brazilian weather influence. We compute a 200 ending stock as implying 1400 futures, 220 at 1360 and 250 at 1295. We would expect prices to hold a light premium over this implied 1295 price in the coming weeks.

World soybean stocks were lowered on this report from 115.6 million tonnes to 114.5. On this report USDA left their 48 mt and 163 mt production estimates for Argentina and Brazil unchanged. That’s not a major surprise. USDA is often resistant to making production changes at planting. We may see a light acreage decline when all said and done. It is still too early to official take of Brazilian yields. Brazil’s Conab also feels the same. This morning they upped their view of production, 162.0 mt last month to now 162.4. Weather at reproduction, in January, is key for yield determination. Chinese production and imports were left unchanged from last month, 20.5 and 100.0 respectively. This morning China lowered their view of production from 21.5 mt last month to 20.9. They left their 97.25 import view unchanged.

Wheat:

2023/24: Ending stocks were raised from 670 million last month to 684. This was over the 669trade estimate (ALDL 670). No change was noted for production. That was decided at the end of September. Imports were raised by 10 while food use was lowered by 4. There was no change in their 700 million export view. There is evidence supporting an increase. To meet this goal remaining export sales through May need to run only -28% from average. Over the past 15 weeks sales have run +3% vs. average. Given that US wheat prices are determined by the trade’s confidence over Ukraine and Russian exports and monetary policy we expect no price changes from this report.

The world ending stock estimate was raised from 258.1 million tonnes to 258.7. The Argentine harvest estimate was lowered 1.5 mt to 15.0. The two exchanges in Argentina are at 15.4 and 13.5. The Australian harvest estimate was left unchanged at 24.5. Kazakhstan’s crop was lowered by 1. USDA finally chose to address recent Russian crop upgrades, moving from 85.0 to 90.0. Though this is a dramatic one month increase it was needed. Russia’s ag ministry is at 93.0. The two main private Russian research groups are just over 91.