WESTERN PRODUCER — Farmers in the United States grew a lot more corn than originally anticipated and that will be a bearish factor for Canadian feed barley prices.
The U.S. Department of Agriculture raised eyebrows with its November .
“It was a surprise today, I have to admit,” said DTN lead analyst Todd Hultman.
The big shock was contained in the new U.S. corn average yield estimate of 174.9 bushels per acre, up from October’s 173.
That is expected to result in a record of 15.234 billion bu. of U.S. corn production, a 170 million bu. increase over its October estimate.
The USDA had to boost its feed, ethanol and export demand estimates to mop up that newfound corn.
That included bumping up corn exports to Canada by one million tonnes to 3.2 million tonnes, which will provide stiff competition to farmers selling their feed barley.
U.S. corn ending stocks for 2023-24 also grew to 2.156 billion bu., the highest level in seven years.
That pushed down its forecast for the average farm price by a dime to US$4.85 per bu.
December corn futures fell following the report, matching the 2023 lows of about $4.68 per bu.
Arlan Suderman, chief commodities economist with StoneX, has an even more bearish outlook for corn.
He thinks the average yield will continue to climb in future USDA reports until it reaches 175.7 bu. per acre.
Suderman also believes that feed and export demand will be much lower than the USDA is forecasting.
U.S. corn exports to date are 48 million bushels below the pace needed to meet the USDA’s numbers.
He believes ending stocks will be 2.5 billion bu., a whopping 342 million bu. higher than the USDA is estimating.
That would drive the average cash farm price down to $3.90 per bu., which would be even more
Hultman is in the opposite camp. He expects a post-harvest price rally because of strong export demand for U.S. corn and the early-season weather woes in Brazil.
The USDA report was more neutral for soybeans. The agency made slight upward adjustments to U.S. soybean production and ending stocks, but supplies are still going to be tight.
It did not make any adjustments to despite hot and dry conditions in the central and northeast part of the country and excess moisture in the south.
“Frankly, I think the market is much more concerned about that than anything they saw in today’s report,” said Hultman.
July soybean futures finished the day at $13.74 per bu. What is remarkable about that is that speculators are only net long 16,000 contracts, which isn’t much.
“It doesn’t have the bearish risk to it, as say other situations where we have speculators heavily involved in the long side of the market,” he said.
“It’s impressive to see prices challenging $14 without much speculator involvement. That, to me, is the sign of a strong, bullish market.”
Suderman’s soybean yield and production numbers are slightly higher than the USDA’s. But he has a smaller export number, so the two ending stocks estimates are similar. The USDA is at 245 million bu. and he is forecasting 248.
Soybean exports are about 160 million bu. behind the pace required to meet the USDA’s number. But that deficit will likely be cut in half because of big recent sales.
Suderman said the soybean outlook depends a lot on what happens in Brazil, which is off to a shaky start.
The USDA did not make many changes to the U.S. wheat balance sheet other than increasing ending stocks by 14 million bu. to 684 million bu.
That drove down the estimated 2023-24 farm price by a dime to $7.20 per bu.
Supplies are still not super bearish. It is demand for U.S. wheat that is the problem.
“We just continue to struggle to find any export business,” said Hultman.
Competition from cheap Russian wheat has been overwhelming in global markets and that situation just got worse.
The USDA now estimates at 90 million tonnes, up from its October forecast of 85 million tonnes.
The new estimate is more in line with forecasts from the Russian government and private analysts.
World wheat ending stocks excluding China are forecast at 124.8 million tonnes, the lowest level in 15 years despite the increase in Russia’s production.
“That should count for something if we can ever get some demand generated,” said Hultman.
He noted commercials are net long 29,527 contracts in December Kansas City futures, while non-commercials are net short 27,343 contracts.
The non-commercial speculators will likely have to cover their short position at some point and that could lead to a rally, but it has been a long time coming.
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