The much anticipated bevy of January USDA information released this morning was not overly surprising, but generally a disappointment to the bears.
A quick summary of the report: Cut in corn exports by 50 mln bu which was offset by lower yields leaving 15/16 carryover just above the trade estimate at 1.802 bln bu. Soybeans were friendly from a reduction in yield and acres bringing a 15/16 carryover of 440 mln bu, well below the trade expectation of 468 mln. Wheat had two components today with ending stocks growing 22 mln bu more than the trade expected but the story was in the Winter Wheat seedings report showing 2016 acres 2.72 mln acres below the trade expectation – the biggest miss by the trade since 1998.
Crude oil continues the pressure in the outside markets with new lows again as it descends toward the 30 dollar mark. Rumblings of discontent among OPEC on frustration over Saudi Arabia’s continued pumping affecting major state revenues of member countries is bringing the cartel together for a meeting again in a month. Saudi Arabia has been intent on punishing frackers, Russia and Iran.
Corn ending stocks have small growth from lower production offsetting export reductions.
Corn’s national average yield was lowered by 0.9 bu per acre from the previous estimate at 168.4 bpa with a slight increase in acres dropped production by 53 mln bu but remains the third largest crop at 13.6 bln bu. Feed and residual use is unchanged as Dec 1 stocks was mostly in line with expectations. Ethanol usage was unchanged but exports dropped 50 mln bu on the slow pace of sales and shipments to date.
State by state yields had IA, MN, IL up on yield and WI, NE, KS, SD, ND, IN, OH and MI lower on yield from November.
Global carryover was lowered 2.91 mln mt to 208.94 mln mt on lower production for South Africa and the US and small decreases in China and Peru.
Interesting to note from the stocks report is that the farmer is not as undersold as the market has believed. If the case, this could present less selling pressure on rallies than anticipated.
Technically the corn market has continued to hold front month price above 3.50 but ran out of buyers on today’s initial reaction rally to the report yielding a close today in the middle of the trade range and still below. A weekly close above 3.61 Friday will have price back above a long term trendline and have weekly stochastics turned up out of oversold territory.
Soybeans higher on lower acres and yield dropping ending stocks 25 million from the December estimate.
Soybean production is estimated at 3,930 mln bu, down 51 mln on lower harvested area and yields. Harvested area is estimated 81.8 mln acres, down 0.6 million from the previous forecast. Yield is estimated at 48.0 bpa, down 0.3 bu (but still a record). Ending stocks are projected at 440 mln bu, down 25 mln from last month.
State by state changes since November had IA, NE, ND, MI up on yield and IN, WI lower.
Marketing patterns look fairly normal with on-farm ownership being the same as usual despite larger production.
Soymeal was able to break through the downtrend line of the channel that it has been caught in but still has to prove follow through higher this week and the ability to close above 285 March. Soybeans closed in the upper half of today’s range but off the daily high and below the trendline from the December highs. Resistance for the balance of this week will be today’s high and 9.00 above that.
Wheat seedings surprise the trade on much lower acres than anticipated.
Talk from today will be on the drop from expectation in the hard red winter wheat seedings as hard red winter wheat acres came in at 26.5 mln vs the trade expectation of 28.81 that the trade was anticipating. The all winter wheat acres came in at 36.6 mln compared to the trade expectation of 39.32 mln acres. The largest miss by the trade on seedings since 1998.
Projected 15/16 wheat ending stocks are raised 30 million bushels. Global wheat supplies for 15/16 are raised 1.2 mln tons on both increasing stocks and production. With supplies increasing and use reduced, ending stocks are raised 2.2 mln tons to a record 232 mln tons. This total is 9 percent larger than the previous stocks record set last year.
Kansas City led price action today on the lower hard red seedings, putting the March Kansas City contract back at the top of the descending wedge it has been trading in for the past four months. Resistance will be today’s high, then 5.15 and 5.40. The market will continue to be burdened by large domestic and global carryouts.
USDA lowered 2015 total meat production is lowered from last month as lower pork, broiler and turkey production offsets higher beef production.
For 2016, the USDA forecast is raised as higher pork, broiler and turkey production more than offsets lower forecast beef production.
Higher cattle slaughter in late 2015 resulted in a higher beef production estimate, but lower than expected placements in late 2015 are expected to result in lower fed cattle marketings and slaughter in 2016 and the beef production forecast for 2016 is lowered.
Pork production for 2015 is lowered as end of year slaughter was lower than expected. Pork production is increased slightly for 2016.
Beef imports for 15 and 16 are reduced, reflecting the pace of trade to date and relatively weak prices for processing beef. Beef exports for last quarter of 2015 and early 2016 are raised on gains on sales to a number of markets. Pork imports and exports are unchanged from last month.
Closing Market Snapshot
All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.