Grains Rally on a Bullish WASDE Report

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WASDE Report Recap: 

Friday’s USDA report was headlined by a larger than expected reduction in national average soybean yields. Yields were lowered from last month’s 53.1 BPA to 51.7 BPA – bringing it below previous record highs. Despite the seemingly friendly headline figure, corn and soybean prices were unable to maintain the immediate post-report strength. Corn production, and consequently ending stocks, were lowered in the report as a result of a modest 0.7 BPA reduction in yield estimates. Meanwhile, wheat balance sheets were bolstered by 5 million bushels on higher imports of HRS wheat. 

Corn:

USDA slashed national average corn yields slashed 0.7 BPA 183.1 BPA. As a result, corn production was cut 60 million bushels to 15.1 billion bushels. The demand side of the balance sheet was left unchanged, but recent export activity has been impressive. Export sales this week were a whopping 2,767k tonnes, and sales are up 48% year-over-year. All in all, the report was not groundbreaking for corn. The inability to maintain the post-report gains was mildly concerning. Corn prices failed at the upper boundary of our 3-star resistance pocket, and proceeded to give back 3 cents. The limp into the close may push prices back to our pivot pocket between 425-426 ½ before ultimately retesting our 3-star resistance pocket again.  

Soybeans: 

No need to mince words – the fundamental rejection of today’s report was disappointing. National average soybean yields were slashed 1.4 BPA to 51.7, which resulted in production being curtailed by 121 million bushels to 4.5 billion bushels. Not only did this push soybean yields back below previous record highs, this marked the single largest reduction in Oct-Nov yields in more than 30 years. Ending stocks were only cut by 80 million bushels to 470 as those production cuts were partially offset by cuts in export estimates and crush. The yield reduction was a very friendly surprise, and November soybeans managed to rally all the way up to $10.44/bu shortly after the report. Sadly, soybeans walked those gains all the way back to settle at $10.31/bu. But it’s not all doom and gloom – we’re more than 60 cents off of the late October lows, and we still settled above our 4-star resistance pocket between 1018 and 1024 ¾ . 

Wheat: 

It was largely a ho-hum WASDE for the wheat complex. Aside from the 5 million bushel increase of HRS wheat for food use, there were no materially significant changes on the domestic balance sheet. Interestingly, global production estimates were increased by 0.7 million tonnes to 1,061 million due to production increases from Kazakhstan more than offsetting reductions from Argentina, Brazil, Russia, and the EU. Much has been made about the reduction in exportable wheat supplies coming out of Russia as a result of the drought conditions but that failed to materialize in today’s USDA report. Wheat prices have remained range-bound for the better part of the last month. Today’s report didn’t provide the fuel to make December wheat prices break out of the sideways trade. 

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