Column: USDA studies decrease corn, beans, wheat bullish | Ag/Power

Column: USDA studies decrease corn, beans, wheat bullish |  Ag/Power

Peace be upon you, market observers. It is the weekend earlier than the supposed Arctic Explosion, which inevitably coincides with the Agrivest Ranch present. So long as the snow stays away, situations might be supportive of foot site visitors, and it was nice to see everybody.

It has been an exhilarating journey since returning to the farm after working in Asia for 10 years. Constructing the provision chain, danger administration and enterprise to assist native agricultural producers has been difficult however extraordinarily rewarding. Our business is steeped in custom, but it surely requires extra competitiveness, know-how and capital than ever earlier than.

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It has been per week of anxious buying and selling forward of the USDA’s crop manufacturing and WASDE report on Friday, in addition to an replace on US winter wheat planting acreage. There have already been many surprises as we normally see from these authorities updates. First, U.S. corn yields for final 12 months’s crop had been raised to 177.3 bushels per acre (bpa) from 174.9 bpa, which was additionally the typical of the commerce estimate. Whereas acres harvested got here in barely decrease than anticipated, it was not sufficient to offset increased yield estimates which in flip elevated complete manufacturing to fifteen.342 billion bushels from 15.234 billion bushels, when a slight decline to fifteen.226 billion bushels was anticipated.

US soybean revenues additionally rose to 50.6 thousand barrels yearly from 49.9 thousand barrels yearly. Acres harvested had been decrease than anticipated, however elevated complete manufacturing to 4.165 billion bushels from the earlier USDA estimate of 4.129 billion bushels, which is mainly the typical of commerce estimates. These manufacturing will increase introduced 2023-2024 U.S. grain inventories to 2.162 billion bushels from 2.131 billion bushels and soybean ending inventories to 280 million bushels from 245 million bushels.

US grain inventories on December 1 had been increased than anticipated for corn (119 million bushels), beans (25 million bushels) and wheat (23 million bushels). The USDA’s estimates of South American crop manufacturing had been of nice significance after a current drought and warmth wave lowered its personal forecasts for Brazil’s crop. Soybean manufacturing was pegged at 157.0 million metric tons (MMT), 1.0 MMT above the typical commerce estimate and 4.0 MMT beneath the earlier USDA forecast. Brazilian corn manufacturing got here in at 127.0 million metric tons, 2.0 million metric tons beneath earlier numbers, however 1.8 million metric tons above the typical commerce estimate. Soybean manufacturing in Argentina rose 2.0 million metric tons versus earlier USDA estimates and 1.1 million metric tons above business estimates. Argentine corn manufacturing was unchanged at 55.0 million metric tons from earlier estimates and solely 0.2 million metric tons above business estimates. Ending world soybean shares rose solely barely by 0.4 million metric tons to 114.6 million metric tons, though they had been anticipated to fall to 111.9 million metric tons. World ending shares of corn elevated by 10.0 million metric tons to 325.2 million metric tons, whereas commerce anticipated a slight decline.

Soybean and corn futures fell after the report was launched at 11 a.m. and remained beneath stress via many of the session. Nonetheless, 30 to 45 minutes after the discharge, crop markets began to rise once more and had been capable of shut at 21.25 cents and 6 cents off the session lows for soybeans and corn, respectively. The opposite massive shock within the weekend studies got here from US winter wheat acres. Total, acres planted within the wheat class totaled 34.425 million acres, 2.274 million acres lower than final 12 months and, extra importantly, 1.361 million acres beneath the typical business estimate. The most important decline in exhausting crimson winter wheat acres was 1.113 million acres beneath business estimates and almost 1.7 million acres beneath final 12 months’s growers. Comfortable crimson winter wheat acres had been 217,000 acres decrease than forecast and 500,000 acres decrease than final 12 months. White wheat acres had been additionally decrease than final 12 months.

World ending shares of wheat got here in barely bigger than anticipated at 260.0 million metric tons versus 258.3 million metric tons anticipated on account of will increase in manufacturing, Russian and Ukrainian exports, and Australian and Canadian exports regardless of a slight decline in EU exports. The wheat market managed to stay flat on the launch of this report, turning constructive for a brief interval earlier than promoting off beneath stress from soybeans and corn. Nonetheless, whereas crop markets resisted, the wheat market discovered its stride with Kansas Metropolis wheat closing virtually constructive and Chicago wheat down 9 cents from session lows. With the US greenback buying and selling sideways this week, and shutting the week beneath the pattern line, awaiting the subsequent FOMC determination on January 31, we may see additional weak spot supporting exports.

Nonetheless, the US CPI report on Thursday confirmed shopper costs rose 0.3% in December, increased than the anticipated 0.2%. Thus, annual development reaches 3.4%, in comparison with the anticipated 3.2%. The core CPI, excluding risky meals and power costs, rose greater than anticipated from the degrees of the earlier month and a 12 months. Greater shelter prices accounted for greater than half of the rise within the core CPI, whereas wages rose 0.2% from the earlier month adjusted for inflation.

Have these giant numbers of crops been priced into the market with Friday’s rebound from the lows? It is a good chance. Chilly climate transferring via US wheat producing areas may spark shopping for on fears of winter killing. The corn and soybean markets are additionally oversold with gaps on the prime on the chart which I imagine will fill within the coming weeks. For those who promote any of those drugs right here, I might take into account repossessing them within the futures market.

The livestock market can also be prone to react to approaching winter climate that can sluggish the tempo of positive aspects on feed farms. This assist is required for markets within the close to time period as I’m more and more involved that decrease meat costs are slowing packers’ curiosity in persevering with to assist increased feeder cattle costs. This, in flip, results in an intensification of the confrontation between packing firms and feedlots. With giant numbers of forage and heavy cattle on feed farms the place homeowners insist on higher costs, we danger a scenario the place there are extra market-ready cattle than the market, via packers, needs to purchase. This interprets right into a market the place there may be at present no stock, however there may be an oversupply within the close to time period which can point out decrease costs.

As soon as we get via this winter climate, that is my concern for the feeder cattle market till demand and provide realign. Feeder cattle contracts closed above the 50-day transferring common for the third straight session on Friday, whereas stay cattle contracts remained beneath the 50-day transferring averages. If we get quite a lot of freezing rain in key feeder states, this feeder market may explode increased. Nonetheless, if it is simply cool temperatures and restricted precipitation, these forecasts could also be overstated. My recommendation is to guard your nutrient market from rising climate premiums, particularly should you’ll be again close to the place to procure them. I feel there may be extra upside on this market, however I am not but satisfied that till the provision of marketable cattle will get extra in keeping with demand and beef, as is the case with meat, costs stabilize.

Markets can be closed on Monday for Martin Luther King Jr. Day.

I want everybody a profitable buying and selling week.

(Tags for translation) Economics

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