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WASDE: corn neutral, soybeans bearish

By Staff | Dec 20, 2018



A “so-so” market situation, with corn in the neutral position and soybeans coming in bearish, was revealed in the December World Ag Supply and Demand Estimate report.

In the report, released on Dec. 11, the corn numbers came in light of an estimated 50 million bushel reduction due to an expected lesser demand for U.S. ethanol, paired with world corn stocks looking at a 9 percent drop on the year.

Soybeans came in bearish as a result of U.S. exports coming in below the USDA pace, and an increased Brazilian crop expected for 2018-2019.

Todd Hultman, DTN lead analyst, said the USDA did not change production estimates on the December report, but added the January report could be interesting, with the possibility of numbers reflecting a difficult 2018 harvest season that featured ruined soybean crops and hardships in getting the overall soybean crop harvested throughout the entire U.S. Midwest and Delta areas.


Hultman said the only real change that came in the corn numbers was the reduction in numbers of demand for ethanol mentioned previously. But that was not significant enough to have an effect on corn prices.

U.S. ending stocks for corn increased slightly at 1.78 billion bushels, and world ending stocks for corn were also up slightly at just over 308 mmt, down 9 percent from one year ago. Hultman said the only real point of interest in the world production corn numbers was an increase in production for Ukraine – competitor of the U.S. in the corn market – coming in at 35 mmt, up from 33.5 mmt.

Hultman said USDA’s 2018-19 export estimates landed unchanged at 2.450 billion bushels, while U.S. corn shipments are off to a “good pace early in the season” at 581 million bushels, up 83 percent from one year ago.

Total commitments are up 17 percent.

“The corn export situation is off to a good start and remains at a bullish pace,” said Hultman.

The futures spread shows a neutral situation, with the March-July corn spread trading at 54 percent of full carry, with no strong move to push the March price higher relative to July.


U.S. soybean ending stock numbers did not change in the December report, nor did any of the numbers on the supply and demand table for U.S. soybeans.

The ending soybean stocks were also unchanged from November at 955 million bushels, while crush demand settled at just over 2 million bushels. Exports stayed at 1.9 million bushels.

Hultman said the one significant change of the soybean report came in world ending stocks, with U.S. estimates increasing from 112 million metric tons (mmt) to just over 115 mmt. That translates to 4.24 billion bushels.

“That was probably the only move of any size in this December report,” said Hultman. “But when USDA puts out the ending stock estimate, it’s a mid-season estimate for Brazil and Argentina, but it’s an ending stock estimate for the U.S., so if we compare to local ending stocks the actual number would be much smaller.”

According to Hultman, Brazil’s harvest last year featured record numbers, and they are on track for new record harvests this year, although Brazilian governmental numbers do not predict as high of numbers as the USDA.

The ag department’s numbers predict a slightly smaller U.S. soybean crop than Brazil’s for the upcoming growing season.

“There were no changes made to China’s import estimate, but they continue to expect China to import 19 mmt of soybeans, though it’s not coming from the U.S.,” Hultman said. “Their demand is still strong, it’s just not coming from the U.S., with the trade dispute.”

He added the soybean basis has been at its lowest level in 11 years, coming in at more than $1 below the November contract. Improvement is slowly coming, but the trade dispute isn’t helping the basis. He said normal basis this time of year is around 55 cents as a national average.

USDA estimates 1.9 billion bushels of soybeans exported this year, with shipments coming in at 484 million bushels, down 43 percent from one year ago, due to what Hultman called a “non-existent shipment to China.”

He said China only imports 2 percent from the U.S. compared to what they used to import.

U.S. shipments compared to their usual pace show that the U.S. is 700 million bushels below USDA’s estimated export pace.

Hultman said the January-May spread numbers don’t reflect positively, with sharp fall-offs through the summer, and is now priced at 77 percent of carry, which he said is bearish.

U.S. soybean crush has been the one bright spot for U.S. producers, Hultman said, especially following Argentina’s drought. Argentina is the world’s largest exporter of soybean meal, so the U.S. was able to take advantage of that drought at a time when U.S. producers needed another soybean export avenue.

“The crush return based on the January futures contract has significantly contracted back from where it was earlier this year,” said Hultman. “But it looks as if the bullish benefit of Argentina’s drought is starting to fade, and the soy complex prices are returning to a more normal relationship with soybeans that we normally see.”

“It’s still positive … so it’s an encouraging crush, but not the record high levels we saw earlier this year.”

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