CBOT weekly outlook: Some surprises in USDA’s WASDE

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MarketsFarm — The U.S. Department of Agriculture has thrown a few curveballs in an otherwise mundane supply-and-demand report issued Thursday, according to broker Ryan Ettner of Allendale Inc. at McHenry, Ill.

Although USDA, in its December world agricultural supply and demand estimates (WASDE), lowered soybean ending stocks for the 2020-21 marketing year, the cut wasn’t as much as the markets have expected.

The trade also assumed a reduction in the current market year’s corn carryover as well, but the department froze it for another month. There was little change expected for wheat, but USDA reduced 2020-21 ending stocks by more than what the markets thought.

The immediate impact on the Chicago Board of Trade (CBOT) saw double-digit gains for soybeans and modest increases for corn, which turned into losses for the day, Ettner said. Wheat hung onto its strong gains by session’s end.

“We were flat on the day,” he said. “We took away some of that pre-buying we had going into the report.”

Changes to corn and soybean carryovers in the December WASDE were disappointing, he said, noting the reduction to the wheat carryout was something of a pleasant surprise.

Trade predictions for soybean ending stocks averaged 168 million bushels, but USDA cut it to 175 million from last month’s 190 million. Also, the department bumped up the soybean crush from 2.18 billion bushels, to 2.195 billion. The total use increased slightly from 4.519 billion bushels, to 4.534 billion.

Market expectations for the corn carryout were to have been lowered to 1.691 billion bushels, but instead USDA maintained the number at 1.702 billion.

Wheat had its carryover dropped from November’s 877 million to January’s 862 million bushels —a fair bit lower than the 874 million the trade expected. Also, USDA raised exports by 10 million bushels, pegging them to be 985 million in 2020-21. Wheat imports were lowered by five million bushels, to now 120 million.

Overall, Ettner said he expects corn and soybeans to grind lower in the short term, while wheat gets a little bit more support, noting December is generally a slow month.

With the end of USDA’s weekly crop progress reports for now, the broker said the market’s attention will focus on the export sales and export inspection reports.

While the main concern toward the December WASDE was on the ending stocks, Ettner said that will change with the January estimates.

“Most years, that’s your biggest one of the whole year. That one we can put discussions of yields, acreage, exports, all of that back on the table. Whereas this report, nobody expected any changes to the production side at all,” he said.

On the global stage, USDA placed world soybean carryout at 85.664 million tonnes, down from the 86.52 million forecast in November. Global corn ending stocks were at 288.96 million tonnes, down from November’s estimate of 291.43 million. The world wheat carryover was down as well, from 320.45 million tonnes to 316.5 million.

— Glen Hallick reports for MarketsFarm from Winnipeg.

Table 1. U.S. ending stocks (millions of bushels) from USDA’s December WASDE.

Commodity.   .
Average.  .
November.   .
Soybeans 168 190 175
Corn 1,691 1,702 1,702
Wheat 874 877 862

Table 2. Global ending stocks (millions of tonnes) from USDA’s December WASDE.

Commodity.   . Projections.        . November.   . December
Soybeans 81.0 – 86.52 86.52 85.64
Corn 284.0 – 293.0 291.43 288.96
Wheat 318.5 – 325.5 320.45 316.50

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