December WASDE Report Recap:
Tuesday’s WASDE report was a long-awaited breath of fresh air for grain bulls as corn, soybeans, and wheat rallied following its release. Most of the day’s fireworks stemmed from the corn balance sheets. Domestic corn exports are off to their hottest start in five years, and USDA had no choice but to bolster its annual estimates by 150 million bushels. World corn ending stocks were also down sharply - slashed by 7.7 MMT to 296.44 MMT despite a slight increase in global production. Wheat took the silver medal on the day with sweeping changes to the global balance sheets as significant production cuts from the EU, and export restrictions came out of Russia, which benefited the U.S. wheat outlook. Lastly, the soybean balance sheets were left completely unchanged.
Corn:
USDA raising domestic exports by 150 mil bu to 2.745 billion bushels was warranted. USDA also raised domestic corn used for ethanol production by 50 million bushels, which resulted in domestic ending stocks being trimmed by 200 mil bu to 1.738 bil bu. The reduction in ending stocks served as the biggest surprise of the day as the figure fell below the average range of trade estimates. Global balance sheet alterations emphasized the position that the U.S. is in. Global ending stocks were slashed 7.7 MMT to 296.4 MMT due to production cuts primarily from the EU and Mexico and heightened import demand from Bangladesh, EU, Mexico, and Iran. It is worth noting that Chinese corn imports were cut 2 MMT to 14 MMT, but China’s corn import activity as of late has been virtually non-existent. So, can the case be made that U.S. corn exports will continue to flourish?
The chart above displaying the monthly export totals by destination shows the weight that Mexico and Japan have played in 2024. Meanwhile, the chart below shows accumulated Chinese corn imports. If a trade deal with China is reached under the Trump administration or Chinese corn imports regress to the mean, it could lead to further strength in corn. All in all, it was a great day for corn settling 6 ¾ higher on the March contract to settle at 448 ½ - breaking, and settling above a crucial resistance point in 446.
Soybeans:
It wasn’t a very exciting day for soybeans with domestic balance sheets left unchanged. Ending stocks were left at 470 mil bu, which aligned with traders’ expectations. Demand for U.S. soybeans has been strong, but not to the same degree as corn. Soybean oil was the news-maker of the complex as recent export sales have mirrored the activity of 2017/18 as a result of a firming in rival veg oils - namely palm oil. Global soybean ending stocks were notched slightly higher to 131.87 MMT as a result of minorly increased production from Argentina. Fortunately, soybeans were able to follow corn and wheat higher with the January contract settling 5 ¼ higher to settle at 9.95 ¼.
Wheat:
Domestic wheat balance sheets firmed due to alterations on the global balance sheets. U.S. wheat exports were increased by 25 mil bu to 850 mil bu. Domestic ending stocks were cut 20 mil bu in a corresponding move to 795 mil bu. EU wheat production was cut 1.3 MMT to 121.3 MMT, and global trade was lowered 1 MMT to 213.7 MMT as a result of Russia’s newly imposed export quota. Ending stocks actually came in 0.3 MMT higher, but remain at their tightest level since 2015/16 at 257.9 MMT. March Chicago wheat was able to stage a marginally higher close at 5.61 ½, but March KC Wheat responded a little more favorably to the WASDE figures settling 6 ½ cents higher 5.65 ¼.
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