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Corn jumps on USDA report

The USDA released bullish corn, soybean, and wheat data Friday, as less stocks were found to be on hand as of December 1.

As a result, the CME Group corn market jumped 23 cents in three seconds, at 11:00 am CT. At 11:20 am, the March corn futures traded 16 cents higher at $7.15 per bushel. The January soybean futures traded 7 cents higher at $14.25, but deferred contracts were lower. The March wheat futures are trading 22 cents higher at $7.67. 

GRAIN STOCKS

In its annual Crop Production and Grain Stocks Reports, the USDA pegged the U.S. corn stocks, as of December 1 at 8.03 billion bushels vs. the average trade estimate of 8.2 billion bushels. Soybean stocks, as of December 1, is estimated at 1.966 billion bushels vs. the average trade estimate of 1.984 billion bushels. For wheat stocks, the USDA pegged the U.S. supply, as of December 1, at 1.66 billion bushels vs. the average trade estimate of 1.674 billion.

CROP PRODUCTION

The USDA estimated the U.S. 2012 corn output at 10.78 billion bushels vs. the average trade estimate of 10.626 billion bushels and the government's December estimate of 10.725 billion. For soybeans, the U.S. farmers produced a crop of 3.010 billion bushels vs. the average trade estimate of 2.999 billion bushels and the USDA's previous estimate of 2.971 billion bushels.

In its report, the USDA estimated the average U.S. corn yield at 123.4 bushels per acre vs. the average trade estimate of 122.4 bushels per acre and the USDA's December estimate of 122.3 bushels an acre. The USDA estimated the 2012 U.S. soybean yield at 39.6 bushels per acre vs. the average trade estimate of 39.6 bushels an acre and the government's previous estimate of 39.3 bushels per acre.

TRADE REACTION

Alan Brugler, president of Brugler Marketing & Management LLC, says the report is bullish, but buying reaction has been muted. "USDA found fewer bushels on December 1 at 8.03 billion. Production was actually raised a little due to yield at 123.4, but implied feed use is larger than the trade had expected, in order to get that December 1 number," Brugler says.

  

The soybean report is bearish by not being bullish, he says. "Projected ending stocks were unchanged at 135 million bushels." 

Soybean production was revised up on both yield and harvested acres. Also, Brazilian soy production is up 1.5 MMT to 82.5 million, but Argentina cut 1 MMT. 

For wheat, the report is bull friendly, with U.S. ending stocks cut to 716 million bushels, Brugler says. "New crop winter wheat acres smaller than expected at 41.8 million, with HRW only 29.1 million vs. trade guess of 30.296."

U.S. cotton ending stocks were down to 4.8 million, but still comfortable, Brugler says. U.S. cotton production was pegged at 17.01 million bales.

Sal Gilbertie, Teucrium Funds analyst, says the report confirms global consumption of all grains last crop year will exceed production by nearly 31 million tons, solidifying the notion that demand for grains even in the higher priced environment of the past year is strong. "Global corn use is projected higher primarily due to higher feed numbers in the U.S. Global corn stocks are also projected to decline, led by the U.S. corn carry-out at especially low levels. Tightness in old-crop corn remains prevalent, and may result in a widening spread between old crop prices and prices for corn in the coming crop year," Gilbertie says. 

End users of corn will be hoping for a repeat of last year’s early planting season to ease concerns of mid- and late-summer supply shortages, he says. The soybean balance sheet remains very tight, but comes as no surprise to the trade, Gilbertie says.

"South American production will be traders’ main focus for the next few months to ease supply concerns in both soybeans and corn," Gilbertie says. He adds, "Global wheat stocks are projected to decline, and U.S. wheat exports are expected to remain stable because of wheat supplies from many alternate suppliers running short due to poor weather abroad."

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