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USDA Corn Yield Estimate Falls, Price Closes Up Slightly

USDA raised the U.S. soybean ending stocks.

DES MOINES, Iowa — The size of the U.S. corn crop falls slightly, according to the USDA Friday.

As a result, the corn market jumped up 5¢ only to reverse lower and then finish higher. Soybean prices reacted and stayed negative against the report.

At the close, the Dec. corn futures finished 2¢ higher at $3.77 1/2. March corn futures finished 2 3/4¢ higher at $3.86 1/4.
 
Jan. soybean futures closed 5 1/2¢ lower at $9.31. March soybean futures ended 4 3/4¢ lower at $9.44.

Dec. wheat futures finished 2 1/4¢ lower at $5.10 1/4.

December soymeal futures finished $0.70 per short ton lower at $304.90. December soy oil futures closed 0.07 cents higher at 31.50¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.05 per barrel higher, the U.S. dollar is higher, and the Dow Jones Industrials are 61 points lower.

U.S. 2019 Production

In its November Supply/Demand Report, the USDA pegged the U.S. corn crop at 13.661 billion bushels, compared with its October estimate of 13.779 billion bushels and the trade’s expectation of 13.643 billion.

For yield, the USDA sees it averaging 167.0 bu./acre vs. the trade’s expectations of 167.5 bu./acre and the government’s October estimate of 168.4.

The U.S. soybean output is pegged at 3.549 billion bushels vs. the avg. trade estimate of 3.510 billion bushels and the USDA’s October estimate of 3.55 billion.

The USDA sees the U.S. soybean yield averaging 46.9 bu./acre vs. the trade’s expectation of 46.6 bu./acre and the USDA’s October estimate of 46.9.

Also, the USDA estimates the U.S. 2019 corn harvested acres at 81.8 million vs. the avg. trade estimate of 81.3 million and the USDA’s October estimate of 81.8  million.

The U.S. 2019 soybean harvested acreage has been printed at 75.6 million vs. the trade’s expectation of 75.4 million and the USDA’s October estimate of 75.6 million.

U.S. Ending Stocks 2019-20

The U.S. is expected to have 1.91 billion bushels of corn, at the end of August 2020 (the end of the marketing year). That compares with the USDA’s October estimate of 1.929 billion bushels and the trade’s expectations of 1.799 billion.

For soybeans, the ending stocks are pegged at 475 million bushels compared with the trade’s expectations 429 million bushels and the USDA’s October estimate of 460 million.

USDA pegged the U.S. 2019/20 wheat ending stocks at 1.014 billion bushels vs. the USDA’s previous estimate of 1.080 billion and the trade's expectation of 1.035 billion.

Trade Reaction

Bob Linneman, Commodity Broker, Kluis Commodity Advisor, says that the USDA gave the corn bulls a sliver of hope today when they cut yield to 167.0 bu./acre.  

“However, the USDA also cut demand. This cut was widely anticipated by traders, as exports remain sluggish.  With prices near the lows of the trading range over the last six weeks, I would not be surprised to see buyers step in,” Linneman says.

Linneman added, “The soybean market was expecting some form of bullish news from the USDA report, today.  Traders were surely disappointed when the USDA left production numbers unchanged from last month’s report. A small bearish adjustment to demand pushed stocks slightly higher, when the market was looking for a move in the other direction.”

Greg Lumsden, Cargill product line leader, says that this report can be seen as neutral, leaving the market to ponder seasonal demand, trade, and South American production.
 
“Heading into the report, the market has been largely rangebound weighing uncertainty of the report with the latest twists in trade negotiations.  The average trade guess was for a mildly supportive production number on both corn and beans,” Lumsden says.  

Traders were looking for an average reduction on the national corn yield of around 1 bu per acre down to 167.5.  

“While the official published figures looked bullish, the whispers from the trade floor and price action indicate that many believe the USDA would raise yield on this report while final yield still remains in question,” Lumsden says.
Lumsden added, “The report posted a 167 yield on corn, which was slightly below average trade guess and based on pre-report market action. Some near-term, short-covering will be expected while the market seeks fair value.”  
 
The USDA offset most of the decrease in production with demand cuts, so the carryout was left largely unchanged, the Cargill representative says.  “Overall market is trading 5-8 higher believing that the highs on yield are in and can work lower from here.”

Lumsden says that now that the report is behind us, it is reasonable to expect a steady to slow grind higher from these levels, as risk premium from South American growing season and unforeseen demand from China could further tighten stocks.  

“The additional uncertainty around later harvested acres will also be mildly supportive.  While we do not believe there will be an explosive rally without a meaningful weather event, we do feel that prices can work higher. The biggest thing to watch is for spreads to tighten and basis firm as producers have been on the sidelines awaiting higher prices and keeping grain off the market,” Lumsden says.

Sal Gilbertie, Teucrium Trading, says that today’s report is fairly benign.

“It shows a small decrease in corn yields and a slightly higher than expected soybean yield, offering little in the way of direction for the coming weeks,” Gilbertie says.

Gilbertie added, “Until the next WASDE report in December, soybean markets will be completely dependent on Chinese news, and corn markets may find some support on a slightly tightened global balance sheet. Harvest progress and trade talks will likely dominate the news cycle moving forward.”

Jason Roose, U.S. Commodities, says that with harvest coming to a conclusion on soybeans, and corn harvest moving at a historic slow pace, today's November WASDE report had to answer many questions to this years crop.

“As harvest progresses, the USDA confirmed the corn crop is getting smaller, but not as disappointing as earlier anticipated. Corn production was reduced 118 million from last month on a 1.4 bushel reduction. World ending stocks were left primarily unchanged from last month for both corn and soybeans which was a surprise to the trade. This is short term optimistic,” Roose says.

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