The USDA caught the grain market by surprise this morning, resulting in corn and wheat prices plummeting. Analysts were expecting the USDA to reduce ending corn stocks by 100 million bushels due to lower than expected yields, but the USDA actually increased corn yields and production, leaving stocks roughly unchanged.
A copy of the WASDE can be found here.
Unexpected and bearish news from the USDA as U.S. corn production is estimated 48 million bushels higher with a 0.5 bushel increase in yield per acre and a 45,000 acre increase in harvested acreage. U.S. corn exports are projected 50 million bushels higher due to strong sales to date and reduced forecast for Argentina.
2011/12 U.S. ending stocks are projected at 846 million bushels, two million bushels lower than last month. The USDA decreased the forecasted season-average farm price by $0.20 to $5.70 to $6.70 per bushel.
The Quarterly Stocks report indicated that corn stored in all positions on December 1st, 2011 was 9.64 billion bushels, a 4 percent decrease from a year ago. Of those stocks, 6.18 billion bushels are stored on farms, and 3.47 billion bushels stored off-farms.
2011/12 global coarse grain supplies are unchanged this month as increased corn production in the United States, Ukraine, EU-27, and Russia is offset by lower expected corn production in Argentina and the decreased sorghum production estimate for the United States.
We will continue to watch Argentina's corn production as La Niña weather patterns of extreme heat reduce yield prospects. Although corn prices decreased, a historically low stocks to use ratio should support corn prices going forward.
Domestic soybean production is estimated at 3.056 billion bushels, a 10 million bushel increase based on improved yields. The soybean yield estimate is up 0.2 bushels per acre to 41.5 bushels per acre. U.S. soybean exports are projected 25 million bushels lower than last month to 1.275 billion bushels. 2011/12 ending stocks are projected 45 million bushels higher to 275 million bushels due to increased yields, decrease in soybean crush, and decreased exports. The U.S. season-average price range for 2011/12 was narrowed by 25 cents on both ends of the range to $10.95 to $12.45 per bushel.
The Quarterly Stocks report indicated that soybean stored in all positions on December 1st, 2011 was 2.37 billion bushels, a 4 percent increase from a year ago. Of those stocks, 1.14 billion bushels are stored on farms, and 1.23 billion bushels stored off-farms.
Global soybean production for 2011/12 is projected down 2.2 million tons to 257 million tons due to lower production forecasts for South America.
U.S. wheat ending stocks were projected 8 million bushels lower to 870 million bushels due to an increase in seed usage and exports. Feed and residual use is projected 15 million bushels lower due to a decrease in expected disappearance during September through November. The season-average price is projected at $6.95 to $7.45 per bushel, a 10 cent drop on both ends of the range.
The Quarterly Stocks report indicated that wheat stored in all positions on December 1st, 2011 was 1.66 billion bushels, a 14 percent decrease from a year ago. Of those stocks, 405 million bushels are stored on farms, a 26 percent decrease from a year ago. Off-farm stocks are at 1.25 billion bushels, a 10 percent decrease from a year ago.
Global wheat supplies for 2011/12 are projected 2.7 million tons higher due to increased production for Kazakhstan, Brazil, and Russia.
The USDA is always good for a surprise. The higher than expected grain supplies will result in downward pressure on grain prices in the short-term. Moving forward, the grain markets will be closely watching South America's corn and soybean production and how La Niña weather patterns will affect yields.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.