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USDA November Reports Did Absolutely Nothing

Monday, November 25, 2019
filed under: Marketing/Risk Management

Those hoping the USDA might make some meaningful adjustments to corn and soybean acres, yields and production in the November reports were extremely disappointed. The USDA basically decided to make very few adjustments to yields or production. 

Here’s what they did:
  • CornThe USDA made zero changes in the planted or harvested acreage numbers for corn.  Record flooding, snowstorms, high winds, etc., had no effect on corn acres. They did reduce the national average corn yield by 1.4 bu/ac. That slight reduction came across the western Corn Belt. Total production declined by 118 million bushels. It gets worse. The USDA also reduced corn used in ethanol by 25 million bushels and feed use by 25 million bushels (despite record livestock numbers on feed).  The export forecast was reduced by 50 million bushels. We can’t argue with the lower corn export forecast because the sales pace has been dismal. The result of all of this was a 19 million bushel reduction in corn ending supplies. That leaves the corn market bearish.
  • SoybeansThe USDA made zero changes in the planted or harvested acreage numbers for soybeans.  Record flooding, snowstorms, high winds, etc., had no effect on soybean acres, either. They also left the national average soybean yield unchanged from October. They reduced the crushing export by 15 million bushels and increased soybean ending supplies by 15 million bushels. This was one big “shank” for the soybean market.
  • WheatThe USDA did reduce the spring wheat harvested acreage estimate by 900,000, presumably because of the wet, delayed spring wheat harvest.  They offset that acreage cut by increasing the yield estimate.  Wheat ending supplies were reduced from 1.043 billion bushels in October to 1.014 billion bushels in the November report.
The November USDA reports will likely have a bearish effect on the markets until their January series of reports that will be released on Friday, January 10, 2020. The USDA does update their U.S. and world supply and demand estimates in December, but they will make no yield or production changes in December. 

The January 10, 2020, series of reports will include their “final” row-crop production estimates.  Those will be incorporated into the supply and demand tables.  The USDA will also release their quarterly stocks report on that day. The stocks report will tell us stocks as of December 1. 

There is still the possibility the USDA will reduce harvested acreage and yield estimates in January.  A significant percentage of the corn and sunflower crops were still not harvested when the surveys for the November report were completed. Producers tell us the early snowstorm did have a major negative impact on unharvested sunflower acres. The sunflower production estimate won’t be updated until July 10.
There are some weather concerns in both Argentina and Brazil heading towards the end of their planting seasons. Dry weather has been a problem in both countries. Brazil pegged their soybean planting progress at 58% in mid-November.  That compares to 72% a year ago and the five-year average of 62%. It is too early for the markets to trade the potential for smaller soybean crops in Argentina and Brazil, but South American weather does bare watching.  
Several things will need to happen to push these markets higher:
  • Phase 1 of a trade deal with China finally gets signed and China would have to immediately ramp up purchases of U.S. soybeans. 
  • China also purchases U.S. corn and wheat as part of the Phase 1 deal.
  • The pace of corn export sales has been dismal.  Brazil and the Ukraine had record corn crops and have been aggressive sellers. Their exports should start to slow.  The key will be if U.S. corn export sales increase quickly.
  • The pace of wheat exports has been enough to meet the USDA’s goal, but that isn’t a very big goal considering much smaller crops in Australia and Argentina and quality issues in Canada’s spring wheat crop.
  • Weather in Brazil and Argentina stays dry and crop production potential declines.
  • The USDA eventually does trim harvested acres and yields of corn and soybeans.                                                   
Mike Krueger founded The Money Farm, and is now a senior analyst with World Perspectives, a Washington, D.C.-based consulting company. While the information in this article is believed to be reliable, marketing involves risk, and the author and The Sunflower assume no responsibility for its use.
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