The USDA solidly raised the U.S. corn crop in the November report to 14.578 billion bushels, up 298 million bushels from last month, with the average yield being raised an impressive 3.6 bushels/acre to what would be an all-time record 175.4 bushels/acre. Today’s revisions set a couple of very impressive, and not to be overlooked, precedents as the 249 million bushel “bearish surprise” was the largest negative surprise ever seen for the November report (average trade estimate was 14.329 billion bushels), while their 175.4 bushel/acre yield estimate now reflects the highest U.S. corn yield estimate the USDA has ever published in any monthly report. The current yield will be the largest on record surpassing last year’s 174.6 bushels per acre. Wisconsin yield was increased 4 bushels from October to 168 bushels per acre.
There is simply no way to look at the current fundamental situation as anything but overwhelmingly negative. Outright U.S. stocks are estimated to be the highest since the mid-1980s, while the stocks/usage ratio sits among the highest levels of the last two decades.
The USDA also raised their world ending stocks estimate by nearly 3 MMT to 203.9 MMT, which was above market expectations of 201.3 MMT, primarily due to the U.S. revisions. The biggest question about potential additional price weakness, though, is who will be the new seller if the market is to move to the next level down. The last CFTC report showed funds already net short 203k contacts in corn, very near their all-time record net short of229k. To make a concerted push to new lows, funds may very well need to extend themselves into record short territory. Fundamentals would certainly appear to support that potential at this time.
The USDA estimated the U.S. soybean crop at 4.425 billion bushels, essentially unchanged from last month’s 4.431 billion bushels, with the U.S. average yield staying at 49.5 bushels/acre. With the average trade estimate of the crop reflecting ideas for a small decline to 4.407 billion bushels, this estimate came in slightly above expectations. Additionally, despite the U.S. average yield being 2.5 bushels/acre below last year’s 52.0 record, the current crop estimate still reflects a new all-time record, surpassing last year’s 4.296 billion as a result of the nearly 7 million acre increase in area from last year. Wisconsin’s yield was lowered from last month by 1 bushel to 46 bushels per acre.
With the minor reduction in the soybean crop being the only change in the balance sheet this month, USDA’s 2017/18 U.S. soybean ending stocks estimate ticked down to 425 million bushels from 430 million last month (427 million average trade estimate), but remains 124 million bushels (41%) larger than 2016/17 stocks of 301 million bushels and dwarfs any levels of stocks seen since 2006/07. As with corn, there is simply no denying the overwhelmingly burdensome nature of the U.S. balance sheet.
Remember, USDA does not issue production updates in the December report, so what you see is what you get until the January 12 Annual Summary.
Local yield reports in southern Wisconsin seem to match the USDA numbers as corn continues to perform better than expected and the last half of the soybeans harvested showed significant yield declines. Corn moisture has been coming in from 18-26% moisture with 20-22% being the most common. Harvest progress has been sluggish on corn however we are nearing 75% completion this weekend.
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