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Monday, January 13, 2014

January 10th USDA Reports, As They Reflect The Cornbelt



 

The U.S. Department of Agriculture released a series of important, market-moving reports on January 10th.  Among them were the Final Production Report for 2013 crops, the January update of the World Agricultural Supply and Demand Estimate, and the December 1 Quarterly Grain Stocks Report.

USDA Report on Corn. 

The Final Production and WASDE report highlights include:
1) Harvested acreage was raised 436,000A, and the ave. yield dropped 1.6 bu. to 158.8 bu.
2) Total production was set at 13.925 bil. bu. with carryout projected at 1.631 bil. bu.
3) Feed use was raised 100 mil., ethanol use was raised 50 mil., exports were unchanged.
4) The average farm price was tightened 5¢ on each end to a range of $4.10 to $4.70.

So what do all those numbers mean?

Corn traders were caught by surprise and had pushed Mar contracts 24¢ lower since the Tuesday high, anticipating a 14+ bil. bu. crop and carryout more than 2 bil. bu. Frantic short-covering  ensued. USDA said completion of the harvest allowed a better insight to actual yield and that was cut by 1.6 bu. per acre. With more accurate yield, the production number was also lowered to 13.925 bil. bu. Lower production and increased use estimates allowed USDA to reduce the carryout to 1.631 bil. bu., which was in the opposite direction anticipated by traders. The result is seen in the 15-min chart below.

So what do you do with that information?

Matt Bennett of TGM Marketing says with a return of cash prices to fall levels, “If you haven't sold any corn at all, I'd be selling a good chunk, say 50% in the next week or so (no lower than $4.25 basis the March), and buy some calls if you feel confident we have some rally left.  If you have good sales on the books from earlier, I would still sell a percentage sometime in the next week.  I do think we can look for some strength in this corn market in the short run due to the market being extremely oversold recently, and index funds continuing to buy corn in their yearly re-balancing efforts.”

So, how did the Cornbelt fare with harvested acres, yield, and production?

 

Corn

Soybeans

 

Acres (mil.)

 Ave. Yield (bu.)

Prod. (mil. bu.)

Acres (mil.)

 Ave. Yield (bu.)

Prod. (mil. bu.)

IL

11.8

178

2,100,400

9.42

49

461,580

IN

5.85

177

1,035,450

5.19

51

264,690

IA

13.1

165

2,161,500

9.24

44.5

411,180

KS

4

127

508,000

3.54

36

127,440

MI

2.25

155

348,750

1.89

44

83,160

MN

8.15

160

1,304,000

6.62

41

271,420

MO

3.2

136

435,200

5.55

35.5

197,025

NE

9.55

170

1,623,500

4.76

53

252,280

ND

3.6

110

396,000

4.62

30

138,600

OH

3.74

177

661,980

4.43

49

217,070

SD

5.86

138

808,680

4.58

40

183,200

WI

3.05

146

445,300

1.55

38

58,900

 

USDA Report on Soybeans. 

Final Production and WASDE report highlights include:
1) The ave. yield was cut .3 bu./A 43.3 bu. and acreage raised to 75.869 mil. acres.
2) Total production was raised 31 mil. bu to 3.289 bil. bu., with 150 mil. bu. carryover.
3) The crush was raised 10 mil. and exports were increased by 20 mil. bu.
4) The average farm price was tightened 25¢ on each end to a range of $11.75 to 13.25.

So what do all those numbers mean? 

The market was on target with its average yield of 43.3 bu.  USDA says the total crop was the third largest US soybean crop.  With the accurate yield guess and the trade expecting a 148 mil. bu. carryout, the report was considered neutral, since USDA projected a 150 mil. bu. carryout.  The bare pipeline supply of 4.5% stocks ratio means that any additional exports will have to be matched with imports.

So what do you do with that information? 

Matt Bennett of TGM Marketing says “If you still have beans, don't wait too long.  I highly recommend you sell them sometime soon.  We are back close to $13, and I could see them falling at least a dollar moving forward.  While we have a small carryout, the crop in South America looks to be the biggest soybean crop ever by a fair amount.  Most of you had great yields; you've ridden this roller-coaster long enough if you still have them.  Exit and smile all the way to the bank!”

USDA Report on Grain Stocks.  

The Quarterly Grain Stocks report indicated less corn than the market expected, with Dec 1 quarterly corn stocks of 10.426 bil. bu. versus the average trade estimate of 10.790 bil. bu. However, putting that number in perspective, it is 30% more than the prior Dec 1 quarterly report.  For soybeans, Dec 1 quarterly stocks were 2.148 bil. bu. versus the average trade estimate of 2.171 bil. bu.  And for wheat, Dec 1 quarterly stocks of 1.463 bil. bu. compared to the average trade estimate of 1.374 bil. bu.

The Grain Stocks Report

This report will have an impact on basis strength, due to large quantities stored on farms that will have to be pulled out of grain bins with doors that have rusted shut since harvest.
1) 6.38 bil. bu. of corn are stored on farms, up 39% from a year earlier.
2) Soybean stocks stored on farms totaled 955 mil. bu., up 5% from a year ago.
3) On-farm stocks of wheat are estimated at 399 mil. bu., down slightly from last December.


 

The Stocks report indicates that you and your neighbors have a lot of grain stored on the farm and that may quickly weaken the basis when corn starts moving off the farm.  According to USDA there is 1.8 bil. bu. more stored on farms now than a year ago, and a lot to move. Your best insurance to take advantage of the basis is to communicate with your elevator merchandiser.  However, as indicated by the (above) chart of stocks on and off the farm, there is a record amount of corn being held at commercial warehouses, and big volumes can mean big deals for the owners that may move a lot of corn to market in a hurry.  The following table indicates state volumes of corn stored on farms in millions of bushels, and the total amount of corn stored in the state (also in millions of bushels) comparing 2012 & 2013.


     Cornbelt corn stocks on farms and state totals in millions of bushels.

 

2012

2013

 

on farm

total

on farm

total

IL

480,000

1,119,285

920,000

1,719,864

IN

270,000

463,199

610,000

883,479

IA

910,000

1,560,221

1,070,000

1,736,598

KS

68,000

246,182

100,000

316,371

MI

155,000

236,776

195,000

291,772

MN

810,000

1,150,463

760,000

1,061,102

MO

88,000

142,972

185,000

270,185

NE

570,000

957,356

760,000

1,249,337

ND

180,000

274,121

185,000

277,870

OH

220,000

354,644

330,000

509,636

SD

240,000

387,001

410,000

644,043

WI

190,000

333,597

205,000

337,998

 

Listen to these analysts for guidance on your marketing effort:

1) Dr. Dan O'Brien, marketing specialist, Kansas State University, analyzes the January WASDE report.

2) Dr. Bill Tierney, marketing specialist, Ag Resource Co., provides his analysis of the Final 2013 Crop Production report.

3) Marty Foreman, senior economist, Doane Advisory Services, interprets the Quarterly Grain Stocks Report.

 

 

Posted by Stu Ellis on 01/13 at 11:26 PM | Permalink

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