USDA soy estimates take market by surprise

The latest US Department of Agriculture (USDA) reports on grain stocks and crop production​ were released Thursday (12 January).

Scott Irwin, professor of agricultural and consumer economics and the Laurence J. Norton Chair of Agricultural Marketing at the University of Illinois, noted a slight drop in usage predicted for soybeans based on what the market expected. “[However], it’s too small to make much difference,”​ he told us.

“Why soybeans are up right now is that the market was strongly leaning [towards the idea] the USDA would increase the soybean yield per acre, and they lowered it to 52.1 [bushels an acre],”​ he said. “That really took a lot of people by surprise.”​

As of December, about 2.9bn bushels of soybeans were in storage, an increase of about 7% from 2015 and overall crop production was up about 10%, said the USDA. Disappearance from September to November 2016 was 1.61bn bushels, said the USDA. The rate is up 15% from what was seen the previous year.

However, data on the US corn crop is not as clear, he said.

“[In] corn the 2016/17 ending stocks [were reduced] by 48m bushels, which on net would be a small plus to the price of corn, but it’s not going to go up,”​ he said. “The market isn’t thinking the ending stocks are really going to go down.”​

The corn yield was reduced, there was a small decline in acreage and an increase in ethanol, but exports stayed the same.

“We get the grain stocks report and, by my calculations, the report indicated that first quarter total disappearance was 132m bushels smaller than the market expected,” ​he said. “That’s not a huge deviation – we’ve had larger bearish surprises.” ​

The amount of US corn stored in December was about 12.4bn bushels, an increase from the past year of about 10%, said the USDA. Overall production was at 15.1bn bushes, up 11% from 2015.

The USDA dropped the amount of feed and residual usage by 50m bushels in reaction to the reduced disappearance, said Irwin. “I think probably the market is going to assign a bit higher weight to the negative stock surprise,”​ he added.

“I bet a lot of people would say that you drop it by 100m [bushels],” ​he said. “I think that’s why corn prices initially dropped, though they’re back to unchanged.”​

Corn disappearance for the September to November 2016 period was about 4.5bn bushels, slightly above the 4.1bn bushels seen during the same period the previous year, said the USDA.

Other feed grains​

Storage of wheat saw an increase from 2015, said the USDA. The level is up about 19% to 2.07bn bushels.

Off-farm storage has seen more growth than that on farm, the department said. External storage has increased by about 21% and is estimated to account for about 1.5bn bushels.

Off-farm storage accounts for crops at mills, elevators, warehouses, terminals and processors, the department added.

Disappearance for the September to November 2016 timeframe is about 472m bushels, an increase of 34% from the previous year.

Barley also saw growth in the amount in storage, with the amount rising to about 193m bushels, said the USDA. The crop saw a storage increase of about 7% with a growth in the amount behind held off-farm.

However, disappearance for the September to November period was 37.8m bushels, a drop of about 2% from the previous year.

The amount of oats in storage dropped 9% to about 75.5m bushels, from the previous year, reported the USDA. Disappearance in the autumn was 3.06m bushels.

Grain sorghum also saw a decline. The amount in storage is about 311m bushels, a drop of 3% from the previous year and overall production was down 20% from the past year.

Disappearance for the September to November 2016 period was reduced by about 30% to 206m bushels.