Wheat Acreage Above Expectations; Other Surprises Lacking

Jan 12, 12:17 pm | Mid-day Commentary | Share this:

It’s been a wildly mixed session, with corn steady, beans up and wheat down 10-14 cents, based solely on new USDA data, of which there were only a few surprises. The wheat market has reacted most violently to higher than expected winter wheat seedings (32.6 Mil, vs. an expected 31.4 and vs. 32.7 last year), but other changes were in line with prior trade guesses. 

Final US corn yield is pegged at 176.6 Bu/Acre, up 1.2 from November. However, harvested corn area was lowered 400,000 Acres, resulting in a very marginal rise in total US production. Dec 1 corn stocks totaled 12.5 Bil Bu, a bit higher than expected, and which forced the USDA to lower its annual feed/residual number 25 Mil to 5,550 Mil. US corn end stocks in 17/18 are forecast to be 2,477 Mil, up 40 Mil from last month. On the margin, adding corn supply is not bearish, but it’s also just a change of 1.6%. South American corn production was left untouched.

US Soybean production was 33 Mil Bu via reduced yield (49.1 vs. 49.5 previously). Exports were cut 60 Mil Bu to account for the pace of sales & shipments to date. Quarterly stocks totaled 3.16 Bil Bu, right at trade guesses, and which confirmed a slightly higher pace of domestic disappearance. Crush was raised 10 Mil Bu to 1,950 Mil. End stocks were raised 25 Mil to 470, which on paper is not bullish but funds’ massive short position is being pared back. And soy oil stocks were cut 80 Mil Lbs to 1,536, a new 5-year low. This morning’s soy complex data just isn’t bearish enough to push the market below major chart-based support. 

US wheat stocks were raised 29 Mil Bu amid reduced feed and seed use. Wheat exports were left alone. HRW stocks were lifted 14 Mil, SRW 11 Mil, SRW 1 Mil, durum 7 Mill, while white wheat stocks were lowered 4 Mil. New crop winter wheat seedings were put at 32.6 Mil, vs. 32.7 a year ago. HRW acreage is estimated at 23.1 Mil, vs. 23.8 Mil last year; SRW is estimated at 6.0 Mil, vs. 5.6 last year. Even by-state changes were minimal. 

While higher than expected this does exacerbate the battle for acreage across the Plains and Delta. With more land than expected dedicated to wheat production, and with sorghum, cotton and soybean markets performing much better than corn, corn area next year could be lower than expected. 

In its world numbers, Russian wheat production was raised 2 MMTs, but this is more than offset by higher domestic/export demand. Black Sea wheat stocks are actually down 500,00 MTs from the Dec WASDE. Aussie stocks, too, are down 1 MMT to a new 9-year low 3.2 MMTs. Aussie wheat exports were lowered 1.5 MMTs.  

Brazilian soybean production raised from 108 to 110 MMTs following a lack of threatening weather so far. Argentine production was lowered 1 MMT. Including Paraguay total South American soybean production is now projected at 175.4 MMTs, up 1 MMT from December but down 7 MMTs from last year. No changes were made to China’s soy balance sheet.

The South American forecast is drier in Argentina next week but otherwise unchanged. A drier trend in Central & Northern Brazil begins early next week, and its duration is rather important. Monday night’s forecast will be heavily scrutinized.

The US forecast maintains complete dryness across the whole of the Plains over the next weeks, which along with normal/above normal temps will allow drought to intensify further. Wheat abandonment will be questioned if drought persists into early spring.

AgResource Market Comment: The highly anticipated January reports have now come and gone. Higher than expected wheat acres are noted, but today’s data doesn’t change the overall structure of ag markets. Currencies (the dollar is testing 2017’s low) and South American weather are most important moving forward.