Long-term impact of USDA reports


On Jan. 12, the U. S. Department of Agriculture put out several reports on stocks, production, demand and acreage of major crops. These reports are a turning point, taking the market from old crop to new, shifting focus to the future. The report progression goes from official, fall-harvested crop production wrapping up the 2017 growing season, to quarterly grain stocks providing a snapshot of supplies on-hand, to winter wheat planted area and updated supply and demand forecasts which look to the coming crop year. The broad takeaways from these reports are that overall supplies remain large, wheat area continues to dwindle, and the battle for acres in the U.S. between corn and soybeans will favor beans.

The quarterly stocks figures showed greater corn and wheat supplies than expected, while soybeans fell modestly below pre-report expectations. Add to this that corn production was bigger than initially thought, with yields rising to an even greater record 176.6 bushels per acre. Soybean production was lower than expected, too. Combining these facts, corn prices fell to a new contract low (on the July 2018 futures) while soybeans were supported. So looking ahead, farmers will be faced with the decision of whether to plant corn or soybeans in just a couple of months, and pricing favors soybeans. Could this be the year that soybean planted area surpasses corn in the U.S.? Prices suggest that this may occur.

Winter wheat area dropped from a year ago but only modestly. Average trade estimates suggested a 1.3 million acre drop, but actual USDA data only showed a 100,000 acre reduction from last year. In the short term, this (along with greater than expected quarterly stocks) was bearish. However, one must not overlook the fact that acreage is still down and any weather event would reduce 2018 output.

Statistics Canada's report to be released on Feb. 5 will give perspective on Canada's supply situation.


Wheat markets ended the previous week with declines back towards old lows as the USDA report was bearish. U.S. winter wheat planted area is 32.6 million acres, and as previously mentioned, the market was weaker following that news. But this week's market saw some modest recovery as buyers stepped in to capture these lower prices. There really is little potential downside from current prices. Weather will be key in the spring, but there are some major moisture issues in the Plains that have to be addressed.


Durum prices have been steady since last week. The USDA stocks report showed a 23 percent drop from a year ago to 56.2 million bushels. This decline was not unexpected, however.


Canola markets have struggled to find direction. Supplies are good, but so is demand. This puts the focus on broader oil markets. Weather in Argentina has improved slightly but there has been no clear direction there. Palm and soybean oil markets have been weaker, suggesting that canola will be testing support levels soon.


Supplies of mustard seed on hand in the U.S. are down dramatically from a year ago. The drought in the Northern Plains clearly had an impact, not only on yield but also on abandonment (which rose from 4.8 percent in 2016 to 7.4 percent). This decline is a bit misleading from a historical perspective, however. Yes, production and supplies are down from 2016, but 2016 was the largest production year ever for the U.S. 2017 is still the second largest production year for mustard seed.


U.S. barley stocks as of December first totaled 155 million bushels. This is a 19 percent drop from a year ago.