Jan. 12 is report day for the U.S. Department of Agriculture's final crop production estimates on corn, soybeans and wheat.
Supply and demand numbers also will be released on a host of commodities, but most notably in agriculture on grains and soybeans. Because the harvest is done for soybeans, it will be easier to come by the estimates easier than it will be on corn because of crops still sitting in the fields. I would guess there are perhaps 300,000 acres still unharvested. I would look for USDA to lower harvested acres on corn, and that perhaps brings the acreage closer to 79 million acres.
Consequently, guessing a yield of 163.8 bushels per acre, we could have just shy of 460 million bushels still in the field that is unmarketable, not to mention that yield and quality will decline with time on those bushels as well.
This winter has been one for the record books. High winds and lots of snow is keeping combines out of the fields in most areas and then add in the frigid cold. Equipment doesn't run too well in those well-below-zero temperatures.
Many analysts look for an increase in the yield of soybeans. Yet, Minnesota farmers tell me that this past year's yields were down from the previous year. Let's guess that yield goes up 1.2 bushels per acre to 44.5 bushels per acre. Production would increase to a number around 3.4 billion bushels. The average trade guess is a yield of 43.6 bushels per acre with production of 3.338 billion bushels. However, even with an increase in production, usage will grow substantially larger so that the ending supply declines anyway.
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If China were to stall on buying more soybeans but took all that they have bought, stocks would continue to tighten. Actually, world stocks should remain tight into March and April when South American soybeans become available in the export market. This past week, rumors had it that nearly 3 million metric ton had been rolled out of the U.S. and into Brazilian markets.
I tend to dispel the rumor as soybeans sold to China for February delivery are higher priced in Brazil than out of the U.S., while soybeans priced for delivery in March are not much cheaper in Brazil than in the U.S. (say, 5 to 10 cents).
With fear of a huge record crop coming to ports in March, the ports should become heavily congested and a stevedore strike is a good possibility this year. It is more likely April through August that South American soybeans are going to compete for demand.
Another thought that some entertaining is that the dollar closed lower last year after making higher highs. So I would tend to look for the dollar to approach the lows again. Would China continue to buy U.S. soybeans in an effort to rid themselves of U.S. dollars. Traders also have talked about a corn yield estimate that grows in this coming report. Here again, fine, but usage is increased with stronger demand for ethanol, bigger exports for dried distiller's grains and growing exports. Not to mention that with the bitterly cold temperatures, feed ratios are indicating more corn to put the pounds on cattle.
The Dow Jones-UBS Commodity Index Fund is thought to be expanding its allocation of corn positions by 3 percent, wheat by 1.7 percent and soybeans by 2.2 percent. For now, traders are more positive on corn and wheat with the anticipation of buying by the funds. However, when it comes to soybeans, traders are so bearish on the record production coming out of South America that selling seems to more than offset any buying by the funds.
