The November World Agricultural Supply and Demand Estimates were neutral to bullish for the grain sector.

Even before the U.S. Department of Agriculture released the report on Tuesday, Nov. 9, the soybean market had sold off hard, with fears of higher yields, production and ending stocks. But USDA lowered soybean yields 0.3 bushels per acre to 51.2, which was also below trade estimates. That made the report bullish for beans.

Lower yields in Indiana, Iowa, Ohio and Kansas account for most of the change in production. Jim McCormick with Agmarket.net said he wasn’t surprised by the drop in yield due to the lagging soybean harvest in the eastern Corn Belt. That area has received too much rain, which has shaved off bushels in key production areas due to shattering losses.

“Indiana saw the biggest cut by 5 bushels, while Ohio was down 3 bushels and that offset some yield increases in the western Corn Belt,” he said.

The lower yield resulted in a 23 million bushel drop in production for 2021-22 to 4.425 billion bushels. However, ending stocks were raised from last month by 20 million bushels to 340 million bushels, largely as a result of a 40 million bushel cut in exports. The export reduction reflected reduced global imports and lower than expected shipments through October.

Newsletter signup for email alerts

“The big debate now will be whether or not USDA needs to cut exports even more in the January report because of the slow pace of exports to China as their demand has slowed down and they are buying beans from Brazil instead of the U.S,” McCormick said.

He said China’s economy is slowing down due to COVID-19, so the need for soybeans just isn’t there like it was last fall.

World ending stocks for soybeans for the 2021-22 marketing year were down 800,000 metric tons from October at 103.8 million metric tons. Lower stocks for Argentina and China are partly offset by higher U.S. stocks. USDA left Brazilian production unchanged at 144 million metric tons, while Argentina’s production was cut by 1.5 million metric tons to 49.5 million metric tons.

For corn, USDA raised yield by 0.5 bushels per acre to a record 177 bushels per acre, and that pushed production up to 15.062 billion bushels — a 43 million bushels increase from last month. USDA left exports unchanged, but corn used for ethanol production was raised by 50 million bushels to 5.25 billion. So, that resulted in slightly lower U.S. ending stocks at 1.493 billion bushels. McCormick thinks that ending stocks number is the largest the trade will see for the year, though, as ethanol margins are strong and will continue to increase the demand for corn.

World corn ending stocks, however, were increased by 2.7 million metric tons to 304.4 million metric tons which was well above trade expectations. USDA raised Argentina’s production by 1.5 million metric tons to 54.5 million metric tons, while Brazil production held pat at 118 million metric tons.

Domestic ending stocks of wheat were raised to 583 million bushels, up 3 million from last month’s forecast but still the lowest U.S. ending stocks in 14 years. Global ending stocks were again lowered by 1.4 million metric tons to 275.8 million metric tons, with Australia, the European Union and India accounting for most of the reduction. McCormick expects the tight global supplies to support prices.

“I think, with the global tightness, all three wheat classes could retest the recent contract highs,” he said.