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January USDA Reports & Their Effect on the Markets
Saturday, February 1, 2025
filed under: Marketing/Risk Management
By Mike Krueger*
The tenor of the markets took a significant change with the release of the USDA series of January reports. These reports included the “final” 2024 corn and soybean yield estimates, the December 1 quarterly stocks estimates, the 2024 winter wheat planting estimates — and, finally, the WASDE (world supply and demand) revisions.
The corn and soybean numbers were clearly bullish with yield and ending supply cuts much larger than expected. The wheat numbers were neutral, but the wheat fundamentals have their own bullish prospects.
• Wheat — USDA made basically no changes to the U.S. and world wheat outlook.
They did increase the U.S. wheat carryout by a whopping three million bushels. That is insignificant.
The December 1 quarterly wheat stocks estimate was close to expectations.
• Corn — USDA reduced the U.S. corn yield by 3.8 bu/ac. That is a massive adjustment. Production was lowered by 276 million bushels. Ending stocks were dropped by 198 million bushels to 1.540 billion bushels, compared to 1.738 billion bushels in December. They are now lower than the prior marketing year.
Corn exports were cut by 25 million bushels. This is a surprise, considering the strong current pace of export sales. The rationale for the reduction has to be the expectation that Brazil’s Safrinha (second-crop) corn production will be big. If so, that could shift corn exports back to Brazil. That’s a big if considering this crop has not yet been planted.
Ethanol use was left unchanged. This is a surprise considering ethanol consumption is running ahead of projections.
Feed/residual was also dropped by 50 million bushels. I have no idea why.
The December 1 quarterly stocks number was also more than 100 million bushels below expectations.
• Soybeans — The soybean yield was dropped by one bushel per acre. That lowered production by 95 million bushels.
Ending supplies were cut from 470 million bushels in December to 370 million bushels this month. Remember that several months ago there was chatter that U.S. soybean ending supplies could approach a billion bushels. Those ideas were put to rest in this report.
There were no changes in the soybean production estimates for Brazil and Argentina.
The December 1 quarterly stocks number was also more than 100 million bushels below expectations.
The problem with the soybean market is that U.S. ending supplies will remain much tighter than expected while soybean supplies in Brazil will be huge. That will leave the U.S. as the residual supplier of soybeans, especially to China.
The soybean oil situation continues to be very interesting. USDA increased the soybean oil export forecast but reduced domestic consumption in biofuels.
• Sunflower — USDA revised total U.S. sunflower production slightly lower in the Crop Production Annual Summary.
In October, they estimated total production (oil and nonoil) at 1.3 billion pounds. The January estimate was 1.145 billion pounds.
Total 2024 sunflower production was down 50% from 2023 due to the sharp reduction in planted acres. Nonoil production was down more than 30%, while oil sunflower production was down 48%.
Sunflower supplies remain large despite the steep drop in production in 2024. The market must still work through these supplies. Sunflower prices have started to move higher in sympathy with gains in soybean and soybean oil.
USDA also released their winter wheat seeding estimate. It showed a 2% overall increase from 2023. Hard red winter wheat acres are projected to be up one percent from last year, while soft red winter wheat acres are projected to increase six percent.
These USDA reports have, in my opinion, changed the nature of the corn and soybean markets. Ending supplies of both are no longer burdensome. The market has priced in a record soybean crop in Brazil. The market was expecting a sharp increase in U.S. soybean ending supplies from last year prior to these reports. Soybean futures rallied more than 50 cents a bushel in the days after the release of the reports.
The other issue is the implications of potential tariffs against China by incoming President Trump. That same action resulted in reduced exports of U.S. soybeans to China during Trump’s first term in office.
Now the size of Brazil’s Safrinha (second-crop) corn crop will become very important to the world corn market. The unexpected drop in U.S. corn supplies will put greater importance on the size of Brazil’s Safrinha crop.
* 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.