Bearish reports kick off 2024

CHARLOTTE, Mich. — Traders expected slight reductions in the size of the U.S. corn crop and no changes in the nation’s average soybean yield when the crop production annual report came out — but the opposite happened.

The U.S. Department of Agriculture released the annual crop production, supply and demand estimates, and quarterly stocks reports Jan. 12 that reflected higher production and ending stock numbers.

Angie Setzer and Karl Setzer, copartners at Consus Ag Consulting, hosted a live podcast on X, formerly Twitter, to look at the latest numbers as the reports were unveiled.

“Ahead of the report, traders were expecting little bit of a trim to the corn number. We were at 2.13 billion in December and we’re looking at 2.1 billion as the average estimate,” Angie said.

“For soybeans, traders are expecting 243 million bushels of carryout, which is still pretty tight and not what the market is showing. The trade is not really expecting much in terms of big changes for wheat.”

What ended up happening?

Angie: Corn production was increased to 177.3 bushels per acre, up from the December estimate of 174.9. Corn beginning stocks were just marginally changed a little bit.

Corn production was increased by about 109 million bushels. They did go ahead and say though that because of the larger amount of corn available you’ll see feed and residual up by about 25 million bushels.

They bumped ethanol production by 50 million bushels and kept exports unchanged at 2.1 billion bushels. That raised corn ending stocks estimated to 2.162 billion bushels and traders were anticipating 2.105 billion.

Soybean ending stocks came in at 280 million bushels and a bump in yield to 50.6 bushels per acre, up from 49.9, and traders were expecting yields to be unchanged.

Soybean production came in at 4.165 billion bushels. That’s why the quarterly stocks numbers came in higher than anticipated.

USDA didn’t do anything with soybean demand. So, with all of the increase in production thrown into ending stocks, that’s up to 280 million bushels.

What were some of the numbers that stuck out on the global balance sheets?

Karl: Argentina soybeans are at 50 million tons, just a touch over what trade was expecting. Brazil production is at 157 million metric tons, down from 161 million.

The world soybean carryout coming out at 114.6 million metric tons versus 111.6 tons anticipated. The trade was expecting global corn carryout to come in at 313 million tons and it came in at 325.2 million.

Chinese corn production was bumped up 11.8 million metric tons to 288.84 million versus the prior report of 277 million.

Angie: World ending stocks really didn’t change soybeans, and a lot of folks had anticipated they would. The world corn ending stocks came in much higher than what traders were anticipating.

Much of that was from a big increase in Chinese production. We’d known that China has said it has this big massive crop, and now the USDA said they agreed.

Higher quarterly stocks, reflecting supplies as of Dec. 1, pushed up the production estimates for corn and soybeans.

Karl: Quarterly stocks corn stocks came in at 12.168 billion bushels, 12.05 billion was estimated by the trade and it was 10.82 billion last year.

Soybean quarterly stocks were 2.975 billion bushels versus 3.02 billion last year, and wheat stocks are at 1.387 billion versus 1.31 billion last December.

Winter wheat plantings were also included in the reports, and there were some changes on the soft red winter wheat side. What happened there?

Karl: Winter wheat plantings came out at 34.4 million acres. The trade was expecting 35.79 million, and that’s down 2.3 million on the year. That’s putting a touch of a floor underneath wheat. It looks like the big reductions came in the hard red.

Wheat ending stocks came in 648 million bushels, down from last month’s 659 million bushels. The biggest change is in soft red winter wheat. It looks like we got another bump in exports.

Last year’s ending stocks in soft red winter wheat were 90 million. So, even with the big increase in export sales for soft red winter wheat, we’re actually still up year over year.

What are your takeaways from these reports?

Angie: Domestic ending stocks for soybeans are still incredibly tight. In the export pace that we’ve seen online, we’ve shipped 77% of the USDA’s projected export sales total.

Our biggest problem is that the last 23% is probably going to be like pulling teeth when you compare the economics when Brazil is running 80 cents to $1 cheaper than what we are and some of these other things.

Chinese downstream demand remains really, really poor. Their hog prices continue to collapse. They have one of their larger publicly traded hog producers are now behind on about $75 million worth of debt payments.

There’s a big struggle that’s happening right now in China’s economy as a whole, and in China’s feed margins, crush margins, all of that. We really need to see their hogs bottom out in my opinion and start to correct before we can feel confident I guess about what the demand will look like as a whole.

Karl: The only number I see here that I would call outright bearish and out of line with what really trade was expecting is that global corn number coming in as high as it did. Other than that, really with no changes much on that demand side, I think it runs its course.

But really this report, more than anything, verifies what we know. Our global production is increasing and our demand isn’t running with it to catch up, and I think it just drives that home.