Get Ready for Next Week's USDA Reports
With lagging exports, how big will the end of the marketing year supplies be for U.S. corn? And how much of the old corn and soybean crops are farmers holding on to as of December 1, 2015? The answer to those two questions and many more will be the answers that market participants will focus on in next week’s USDA January Supply/Demand, Quarterly Grain Stocks and the Crop Production Reports.
On Tuesday at 11:00 a.m. CT, the USDA is expected to raise U.S. 2015/16 soybean carryout from its November estimate of 465 million bushels to 468 million bushels, according to the analysts' average projections from a recent poll by media outlets.
For corn, the U.S. 2015/16 carryout is seen at 1.785 billion bushels, equal to the USDA’s last estimate in November.
The U.S. 2015/16 wheat carryout is expected to jump from 911 million bushels to 919 million, according to polled analysts.
Dustin Johnson, EHedger LLC grain analyst, says that all factors are aligned for the USDA to hike the soybean carryout even more than analysts expect.
“I will say that we are going to be closer to 600 million bushels expected for the 2015/16 soybean carryout. Crush missed last month, and we expect declining crush margins and meal imports to slow crush enough to raise carryout. This is on top of the 80 million bushels that we have reduced from the current export estimate,” Johnson says.
Jason Ward, Northstar Commodities Investment Company grain analyst, says that the USDA report is expected to be bearish, but it could surprise the market on Tuesday.
“Could this be the USDA report next week that surprises everyone where the yield actually declines, not increases? I haven’t seen any decrease estimates, so we definitely have everyone leaning one way going into next week. Can’t wait to see the numbers,” Ward says.”
Ward adds, “The fundamentals are still bearish; the trade hope is another bearish report from USDA on Tuesday. If realized, that would stick a low in the market, meaning we will see the largest yield and largest ending stocks number we will get for the year. Then, maybe we will see a low in price, and some buying could occur.”
U.S. Yield Projections
In its report, the USDA is expected to peg the U.S. 2015 average corn yield at 169.5 bushels per acre, nearly equal to its November estimate of 169.3. The U.S. 2015 average soybean yield is expected to be printed at 48.5 bushels per acre vs. the November estimate of 48.3 bushels per acre.
The next question that the market participants want to know is how much grain is still in the on-farm and off-farm bins. The trade sees the USDA pegging corn stocks, as of December 1, at 11.237 billion bushels, with soybean stocks at 2.72 billion, according to the analysts' average estimates. The U.S. wheat stocks are expected to come in at 1.698 billion bushels.
Tim Hannagan, Walsh Trading Inc. senior grain analyst, expects grain stocks to grow, due to a lack of demand.
“Sales are being hurt from both domestic and foreign demand,” Hannagan wrote in a daily letter to customers Friday. This weakness in demand looks to continue to pressure corn prices unless demand surfaces. Tuesday’s report is expected to show record-high stocks on hand, as of December 1 for corn. And we could see an increase in corn production over the November report.”
Because next week’s reports will include the final U.S. production numbers for last year’s crop, the closing price on Tuesday could determine the trend of the market, Hannagan writes.
“If the report comes out more bearish than expected, we look for corn to make new lows. If the report is surprisingly neutral to slightly friendly, we can test recent lows and end up closing higher for the day,” Hannagan stated.
On Tuesday, the USDA will update its world crop production numbers. Al Kluis, Kluis Commodities, stated in this week’s Successful Marketing e-newsletter to customers that few changes are expected in this category.
“In the international numbers, I also expect the USDA to make a slight adjustment down in the size of the Brazilian soybean crop. I think they will be about unchanged on the corn projections. I do not look for any major changes in the Argentine corn and soybean production numbers,” Kluis wrote.