The U.S. Department of Agriculture has released four reports that look likely to push crop prices even higher.
The USDA on Tuesday, Jan. 12, released the January Crop Production, World Agricultural Supply and Demand Estimates, Quarterly Stocks and Winter Wheat Seedings reports, which held several bullish surprises for the market.
The WASDE report cut the national average corn yield by 3.8 bushels per acre to 172 bushels per acre. That resulted in a 324 million bushel drop in production to 14.182 billion bushels. USDA did lower usage to offset some of the lower production figure, with a 100 million bushel drop in exports, 100 million bushel cut in corn for ethanol and 50 million bushel drop in feed and residual use. So, ending stocks were lowered just 150 million bushels to 1.552 billion bushels.
However, Jim McCormick with AgMarket.Net, says those numbers put the stocks to use ratio at 10.6%, which warrants corn prices above $5. Quarterly stocks were also estimated at 11.64 billion bushels, which was nearly 630 million bushels below the average trade guess, but nearly even with a year ago.
Corn production in Argentina was lowered 1.5 million metric tons to 47.5 million metric tons and Brazilian production dropped just 1 million metric tons to 109 million metric tons. McCormick says production needs to be lowered more than that in the future with the dryness concerns in Argentina. World stocks were lowered by 5.2 million metric tons to 283.8 million metric tons.
And it wasn't just the corn market that saw production changes in the report. The bulls were also fed in the soybean market, with a half bushel per acre drop in national yield to 50.2 bushels per acre, which lowered production by 35 million bushels. Most of that drop came in Minnesota, Iowa and Kansas. Ending stocks were also lowered by 35 million bushels to 140 million bushels with a 5 million bushel increase in crush and 30 million bushel hike in exports, offset by a 20 million bushel increase in imports.
McCormick says that puts the stocks to use ratio down around 3% and warrants soybean prices in the $14 to $15 range. He also thinks the market is already trading around a 100 million bushels stocks figure.
"However, I don't think USDA will lower their forecast down to that level until the May report," he said.
Quarterly stocks were also down from a year ago by 319 million bushels at 2.93 billion bushels.
South American soybean production was also eyed by the trade, and Argentina production was lowered by 2 million metric tons to 48 million metric tons. However, USDA surprisingly left Brazilian production unchanged at 133 million metric tons, which McCormick thinks will have to be adjusted lower in the future. World soybean stocks also dropped 1.3 million metric tons to 84.3 million metric tons.
The WASDE also had some positive news for wheat, with domestic carryover dropping by 26 million bushels from the December report to 836 million bushels, which was below average trade guesses. Quarterly stocks were also 167 million bushels below last year and world carryover was also down 3.3 million metric tons at 313.2 million metric tons.
All winter wheat acreage was pegged by USDA at 31.99 million acres, which is up 1.58 million acres from a year ago. Of that, farmers planted 22.3 million acres to hard red winter wheat, which was up nearly 1 million acres from 2020.
McCormick thinks that plantings number will drop going forward as some of the poor hard red winter wheat crop is destroyed and planted to row crops. Winter wheat production was unchanged at 1.825 billion bushels.