USDA’s cut to the estimated US corn yield is the primary driver of a jump in futures values overnight. Photo: Iowa Corn

NUMBERS in USDA reports released overnight saw US corn futures trade limit up, and while revised estimates for US and global wheat were not bullish, wheat markets bounced on the spillover strength from corn.

“With corn very bullish, this drags wheat along,” Lachstock Consulting said in its commentary of the USDA World Agricultural Supply and Demand Estimates (WASDE), US Winter Wheat and Canola Seedings, and US Grain Stocks reports.

US numbers tighten

USDA’s estimate for world production of coarse grains, primarily corn and barley, has been cut to 1438.5 million tonnes (Mt) from 1447.8Mt seen last month.

A big cut to yields has reduced US corn production to 374.3Mt from 382.5Mt seen in December, and exports are down as a result to 72.3Mt from 74.5Mt forecast last month, with ending stocks also reduced.

This has largely fuelled a 5.1Mt cut to global ending stocks for corn to 283.8Mt.

Dry conditions early in the growing season have cut the production forecasts for Argentina, down 1.5Mt to 47.5Mt, while the Brazilian production estimate has dropped 1Mt to 109Mt.

China is now forecast to import 17.5Mt of corn, up 1Mt from the December estimate.

“USDA is still shy of what the trade thinks will get done on corn to China; we expect to see significant revisions higher on corn in future reports, adding to the tightness there.”

While the USDA’s figure for US ending stocks was just below trade estimates, Lachstock said “the devil is in the detail”, with the quarterly 1 December stocks below trade estimates.

“USDA then moulded the annual numbers rationing demand, but if you used similar usage to get to the 1 December number, it’s much tighter by year end.

“The corn yield at 172 bushels per acre was a big surprise, below the average estimate of 175.3, and even below the lowest trade estimate of 173.8.”

USDA now has the US soybean yield at 50.2bu/acre, below the average estimates of 50.5bu/ac.

“The bean report didn’t provide too much divergence from expectations, but the (US ending stock 3.80Mt) 140Mbu is tight, and that validates the crowded long trade.”

Wheat neutral

Estimate of total world wheat output at 772.6Mt is down 1Mt from the December estimate, and global ending stocks are now forecast at 313.2Mt, down 3.3Mt from December.

On wheat imports, only China has had a major upward revision from 8.5Mt to 9Mt, while North Africa is down 300,000t to 29.4Mt, and South-East Asia has dropped 100,000t to 26.25Mt.

The forecast for Argentina’s wheat production and exports have both been cut by 500,000t from the December forecast to 17.5Mt and 12Mt respectively.

Russia is now forecast to produce 85.3Mt, up 1.3Mt from the December number, but the export forecast is down 1Mt to 39Mt.

US winter wheat seeding estimates also came out overnight, and the estimate is up 5 per cent from the December forecast to 12.9M hectares (32M acres).

This is still the fourth-lowest US area on record.

Year on year, US Hard Red Winter wheat area is up 4pc to 9Mha (22.3M acres), while US Soft Red Winter wheat area is up 12pc to 2.5Mha (6.2M acres), while White Winter wheat is down slightly to 1.4Mha.

The USDA’s US seeding report said planting of winter wheat got under way in early September, and was ahead of the five-year average pace.

Throughout the season, planting and emergence progress remained ahead of the five-year average pace, with seeding mostly complete by mid-November.

Source: Lachstock Consulting, USDA

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