Phyllis Nystrom

The following marketing analysis is for the week ending Jan. 13.

CORN — BAM! The U.S. Department of Agriculture certainly surprised traders with its changes on the January World Agriculture Supply and Demand Estimates and Grain Stocks reports!

Corn had traded in consolidating fashion ahead of the reports released on Jan. 12. There was little fresh news to drive the markets, leaving them to rely on the old standards of dry, hot Argentine weather, a lack of export demand, and outside macro markets. Mild support came from a friendly ethanol report and jumping energy markets.

There was light chatter about how much old crop corn Brazil has left to sell. Anec, Brazil’s ag exporter association, anticipates Brazil’s January corn exports will set a record for the month at 5.02 million metric tons — surpassing the 4.44 mmt exports in 2016. Taiwan bought U.S. corn this week with no offers out of Brazil.

Ukraine corn remains at a discount to U.S. origin. According to Argentina’s ag ministry, Argentine farmers have sold an estimated 76 percent of last year’s corn crop compared to 78 percent sold last year by this date. Board inverses widened throughout the week.

But the overwhelming headline this week was the January WASDE and Dec. 1 Grain Stocks reports. The biggest shock on the balance sheet was the slashing of the total 2022-23 harvested acres by 1.637 million acres to 79.2 million acres!   This was the largest November-to-January harvested acreage decrease in history. An increase to 80.763 million acres was expected.

In Kansas alone, harvested acres were cut 710,000 acres with another 480,000 acres cut in Nebraska and 240,000 acres in South Dakota.

Adding to the surprises was an increase in yield of 1 bushel per acre to 173.3 bu./acre when a .2 bu./acre increase was anticipated and thereby lowering the 2022-23 U.S. corn crop by 200 million bushels to 13.73 billion bushels. The average traded guess was 13.933 billion bushels and last month the crop was 13.930 billion bushels. The miss by the trade for production of 203 million bushels was the second-biggest miss on record for this report.

On the demand side, the feed was cut 25 million bushels; food, seed and industry was down 10 million; and exports cut by 150 million bushels to 1.925 billion bushels.

Ending stocks at 1.242 billion bushels was a decline of 15 million bushels from last month and compared to the 1.314 billion bushels estimated. This would be the second-smallest ending stock in nine years. The stocks-to-use ratio was unchanged at 8.9 percent (second-lowest in 10 years) with the average farm price unchanged at $6.70 per bushel. The lower-than-expected ending stocks numbers coincided with the smaller than anticipated Dec. 1 corn stocks at 10.809 billion bushels vs. 11.153 billion bushels estimated. This is the smallest Dec. 1 stocks in nine years.

In the world numbers, ending stocks were 296.42 mmt which was lower than the 297.86 mmt trade estimate and 298.40 mmt last month. Argentina’s crop was cut 3 mmt to 52 mmt and Brazil down 1 mmt to 52 mmt and 125 mmt respectively. Argentina’s exports were down 3 mmt to 41 mmt and Brazil’s were unchanged at 47 mmt. Conab slightly lowered its Brazilian crop production to 125 mmt from 125.8 mmt and 113 mmt last year.  The Buenos Aires Grain Exchange kept Argentina’s corn production at 50 mmt while rating the crop at 7 percent good/excellent vs. 13 percent last week. China’s corn imports were steady at 18 mmt and production increased 3.2 mmt to 277.2 mmt.

The BAGE rated the Argentine corn crop at a measly 7 percent rated good/excellent.

Weekly export sales of 10.1 million bushels were the lowest in 13 weeks. Total commitments of 866 million bushels are down 47 percent from last year. Using the updated USDA export projection, year-on-year export sales are predicted to fall 22 percent.

Weekly ethanol production was increased by 99,000 barrels per day to 943,000 bpd. This is still down 6.3 percent from the same week last year and behind the 1.043 million bpd pace needed to reach the USDA outlook. Stocks were down 644,000 barrels at 23.8 million barrels. Ethanol stocks are 3.9 percent higher for the same week last year. Net margins dropped by 7 cents per gallon to 17 cents per gallon.

Gasoline demand was steady at 7.558 million bpd and was 4.4 percent below the same week last year. Over the last four weeks, it is down nearly 5 percent vs. last year.

China extended the anti-dumping and anti-subsidy tariffs on U.S. distillers dried grains for another five years which were set to expire this week. They have been in place since 2016 and make any imports uncompetitive against China’s own DDGs.

Outlook: I’m not going to venture how high prices may venture, but I think the reports this week helped put in a floor. March corn closed above its 100-day moving average resistance for the first time since Dec. 30. This will become short-term support with the next support near $6.62 per bushel. The December corn contract hasn’t traded to $6.00 per bushel on the board since Jan. 4, so that will be the first obstacle to overcome.

South American growing weather will continue to be in the headlines. How much corn does Brazil have left to market before its next harvest? Don’t get caught looking and hoping. Manage your risk as appropriate for your operation.

For the week, March corn surged 21 cents to close at $6.75, July jumped 15.5 cents to $6.63.75, and December corn climbed 7.5 cents higher to $5.98.5 per bushel.

SOYBEANS — March soybeans tested $15.00 per bushel every session leading up to the WASDE report but hadn’t closed above it since Dec. 30. The January reports changed that when March soybeans closed at $15.18.5 per bushel.

The USDA cut the 2022-23 U.S. soybean crop by 70 million bushels to 4.276 billion bushels which was below the lowest forecast. The average trade estimate was 4.362 billion bushels. The yield was lowered 0.7 bu./acre to 49.5 bu./acre and below the lowest guess. Harvested acres were decreased 295,000 acres to 86.3 million acres vs. 86.62 million acres estimated. Planted acres were unchanged at 87.5 million acres. The trade was expecting a crop of which would have been a 16 million bushel increase. The 86 million bushel trade miss was the biggest in history for the January report.

Other changes on the balance sheet included exports falling by 55 million bushels to 1.99 billion bushels. The residual line was lowered by 4 million bushels resulting in a 10 million bushel drop in ending stocks to 210 million bushels. Ending stocks dropped 10 million bushels from last month to 210 million bushels, the lowest in seven years, and compared to 236 million estimated. The stocks-to-use ratio went from 5 to 4.8 percent and the average farm price rose 20 cents to $14.20 per bushel.  December 1 soybean stocks were 3.022 billion bushels and 110 million lower than the 3.132 billion bushel trade guess and below the lowest outlook. The miss was the largest vs. estimates in at least 33 years.

World ending stocks were 103.52 mmt vs. 101.69 mmt estimated and 102.71 mmt last month. The USDA slashed Argentina’s soybean production by 4 mmt to 45.5 mmt. Their exports were lowered 2 mmt to 5.7 mmt. The BAGE has it at 41 mmt while the Rosario Grain Exchange has it at a dismal 37 mmt. Their soybean crop is rated just 4 percent good/excellent with 23 percent blooming, according to the BAGE.

The trade group Anec says Argentina has been buying Brazilian soybeans in what was described as “atypical” purchasing. Brazil’s production was raised 1 mmt to 153 mmt and exports were raised 1.5 mmt to 91 mmt.  Conab updated Brazil’s soybean production by trimming it to 152.7 mmt, still a record and 27.2 mmt higher than last year. China’s imports were cut 2 mmt to 96 mmt and their production was raised 1.9 mmt to 20.3 mmt.

March soymeal zipped to match the contract high to begin the week before moving sideways before the report. March soyoil showed upside promise to begin the week but traded to its lowest price since Dec. 19 in pre-report trading. Soybean carries narrowed on the board throughout the week. Argentine growers have sold an estimated 80.4 percent of last year’s soybean crop compared to 81 percent sold by this date last year, according to their ag ministry.

Weekly export sales were 26.4 million bushels and within expectations. Total commitments at 1.632 million bushels are up 4.6 percent from last year. The USDA is forecasting a decline of 7.85 percent in year-on-year exports based on the updated export outlook of 1.99 billion bushels.

Outlook: November soybeans traded at $14.00 or higher every day this week but failed to close above it. This will be first resistance for this contract. The weather in Argentina and southern Brazil will be a featured focus in the coming weeks as it has been for the last few months. If the weather turns around, crop estimates may improve. 

For the week, March soybeans rallied 35.25 cents to $15.27.75, July gained 23.25 cents to $15.25, and November fell 4.25 cents to $13.93 per bushel.

Weekly price changes in March wheat for the week ended Jan. 12: Chicago wheat eked out a quarter-cent gain to $7.43.75, Kansas City was 11.75 cents higher at $8.43.75, and Minneapolis was 10.25 cents higher at $9.12 per bushel.   

Phyllis Nystrom is a market analyst with CHS Hedging in St. Paul.    

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