Market Movers: USDA Report Day

The November monthly supply/demand report can sometimes be a market mover. USDA is still adjusting US corn and soybean yields. The next supply change for all three of the main crops will be the January Annual Production Summary. US corn, soybean and wheat demand can also be changed on this report. USDA typically holds from South American production changes so early in their year. For new crop corn and soybeans updated yield were determined by both a farmer survey with 5,840 participants as well as objective in-field analysis.

‍‍Corn 2024/25: Ending stocks were lowered from 1.999 billion bushels last month to now 1.938 billion. This is the fifth month of moderately lower stock numbers. The trade estimate was 1.946 (ALDL 1.946). Yields were revised down from 183.8 bpa to now 183.1. Though a decline, it is still +1.2% from starting trend. The trade expected 183.7 (ALDL 183.5). The 60 million bushel revision for production, now 15.143 billion, below the 15.189 trade view (ALDL 15.177). All areas of demand were left unchanged on this report. That is a clear surprise. The easiest starting point should have been an increase in their corn for ethanol view, left unchanged at -0.4% year/year. We nine weeks of production runs so far that run +3.0%. Technically, if USDA wanted to they could have raised their export view. Year to date sale are strong at +30% vs. the five year average. We are quite ahead of their goal for the whole year, +6%. On this one we agree with no change for now. It is reasonable to assume a strong early year foreign buying effort ahead of potential US trade policy changes then back down later in the year. Our pricing models imply 2.0 billion in stocks allow for a potential futures price of $4.60. A 1.9 stock would imply $4.75. It is quite valid for this market to hold some type of psychological discount. We expect that to last for weeks ahead.  USDA lowered world ending stocks down from 306.5 million tonnes last month to 304.1. There were no changes to South American production on this report. That is normal for a crop so early in the year. USDA did lower Brazil’s export view by 1 on this report. Mexico’s production was lowered by 0.5 mt and USDA raised their imports by 1.5 to now 24.0. That is only moderately under last year’s record of 24.8. China’s import number was lowered from 19 to now 16. The Chinese government is at 13. Overall, we still suggest a lightly positive story for US exports this year. USDA sees non-US corn exports at 130.8, under last year’s 137.4.    

‍Soybeans 2024/25: US ending stocks were lowered a bit more than expected, 550 million bushels last month to 470. The trade expected 532 (ALDL 565). The starting point for this positive change was a yield drop from 53.1 bpa to 51.7. That -2.6% yield hit was the most severe seen for a November report since 1993.The trade view was 52.8 (ALDL 53.3). The message is that this year’s dry Aug/Sep moisture, the lowest of at least 24 years back to 1980, was a more severe yield hit than expected. That yield was lower than every one of the analyst estimates. This yield is now back under USDA’s view of starting trend for the year, 52.0. Production was lowered by a large 121 million bushels on this report. That was much under the 4.557 trade view (ALDL 4.598). Demand was lowered to lightly offset this production. Domestic crush was revised down by 15 million bushels. We suggest there should have been no change. September usage was a strong one at +6.7% year/year. USDA’s current whole-year goal is now only +5.4%. The big variable here for this report, and still ahead for months ahead, is exports. USDA chose to lower this demand area by 25. They are now -7% from the prior five year average. Year to date sales are -10%. There are several reasons to hold concern here. Brazil has had a price discount vs. the US for now three weeks. We may now be seeing signs of an end to recent positive buying. This week’s 371,000 tonnes in overnight sales is the lowest in five weeks. There are no real concerns currently for South American crops. President Trump has previously discussed a potential heavy tariff on Chinese goods of 60%. In the first year of his prior term US exports fell by -52%. Lastly, the trade remembers the prior two years of export revisions from the start of the year to the end, -175 million bushels and -130. We have no strong confidence about the US export picture. It could end anywhere from -400 million bushels to -25 million bushels from USDA’s current view.  Our models imply this stock level could imply $10.60 for futures pricing. We fully expect prices to trade below that value measurement until we see concrete trade policy established. That could be several months away.  World old crop ending stocks were lowered from 134.7 million tonnes last month to 131.7. No changes were noted for South American production. Brazil’s export estimate was lightly raised by 0.5. There were no changes for Chinese current crop numbers. We will lightly note USDA is still using a different Chinese import estimate for the completed old crop year, 112.0 vs. 104.74 from the Chinese government. Different than corn, the world balance sheet remains troubled. A 32.7% stocks/use estimate is the largest in six years.      

‍Wheat 2024/25: USDA lightly added 3 million bushels to their ending stock estimate, now 815. The trade expected a minimal change to 813 (ALDL 812). There were no revision to US production, routine for November. Imports were raised by 5 while food use was raised by 2. There was no change for USDA’s export view, currently -2% from the prior five year average. Year to date sales are just over that at +2%. While we expect a clear positive change to US exports it may be two or three months before that story is noted.  World crop wheat ending stocks were minimally changed, 257.7 million tonnes last month to now 257.6. Argentina and Australia are in harvest right now. Argentina was lowered by 0.5 to now 17.5. There was no change for Australia at 32. The private trade holds a view for production 27 – 31. The completed 2024 Russian wheat harvest was lowered 0.5 to now 81.5. This is under the current 83.0 Russian government estimate. Of note, year to date Ukraine and Russian exports are almost 4 over last year. However, with USDA’s view that they will end the year lower, we could see their exports the remainder of the year -14 from last year. The general world balance sheet for wheat is positive. The stocks/use estimate of 32.1%, a measure of tightness of supply, is at 11 year lows. Also, USDA expects the year’s non-US exports to run a full -10 from last year when all said and done. There will be a point after the New Year where current dryness concerns for the new crop 2025/26 picture could result in price support.