December 13 – Weak December WASDE = Weak Grain Prices

Good Morning!

Today’s Breakfast Brief reviews the USDA’s weak December WASDE report , and then discusses where grain prices can go from here. 

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Grain prices this morning are trying to peek into the green side of things after a weak WASDE from the USDA yesterday.

There weren’t too many things that the bulls could latch on to yesterday in the USDA’s monthly report, so prices mostly wafted lower.

Fun fact: It was the 45th straight December WASDE report that US corn yields went unchanged.

It was a similar sentiment in South America as Brazilian corn production stayed at 95 million tonnes. In Argentina, the number kept at 42 million tonnes.

Corn-for-ethanol raised by 50 million bushels whereas US corn exports were left unchanged at 1.925 Billion bushels.

This explains the 50 million bushel decline in US corn ending stocks, dropping from 2.487 billion bushels a month ago to 2.437 billion bushels in this month’s estimates. The average pre-report trade guesstimate was at 2.478 billion

Ultimately, we’ll take the 50 million bushel increase in US corn demand. [1] There’s will still be nearly 2.5 billion bushels left in the pipeline by the end of 2017/18 though.

Globally, corn ending stocks were raised to just over 204 million tonnes.

Staying in the feed grains, while we know that Australian grain production this year is lower, we note in GrainCents how barley prices have improved significantly, compared to a year ago.

Also yesterday in GrainCents, we dug into some barley trade data, and where Canada might stack up against the likes of Australia and Europe this year, especially as it relates to China.

Another Record Wheat Crop

The USDA says that global wheat production was increased by about 3.5 million tonnes, mainly attributed to the bigger spring wheat and durum wheat crop in Canada that was announced last week. Canada also saw wheat exports raised by 1 million tonnes, but the carryout in the Great White North should still be 6.64 million tonnes by the end of 2017/18, according to the USDA.

European production was also raised by 1 million tonnes to sit at 152.5 million tonnes now.

Both Russia and Ukraine saw wheat exports raised by 500,000 tonnes. Australian and Argentinian balance sheets were left unchanged.

This means that total global wheat production was raised from the being the second-largest crop in history to the largest wheat crop in history at 755.2 million tonnes. The previous record was set last year with nearly 754 million tonnes harvested. What this all adds up to another new record carryout of 268.4 million tonnes. The last record was set last year at 255.3 million tonnes.

Read our more in-depth Grain Cents perspective of the USDA’s impact on winter wheat here, on spring wheat here, and on durum wheat here.

Soybean WASDE Numbers Disappoint Bulls

The market was expecting to see slightly stronger soybeans production in Brazil but slightly lower soybean numbers coming out of Argentina. However, the USDA kept Brazilian and Argentine soybean production numbers for the 2017/18 crop at 108 and 57 million tonnes respectively.

Comparably, CONAB raised its estimate of the Brazilian crop to 109.5 million tonnes. It’s likely that it’s just too early for the USDA to account for some tougher weather conditions in South America.

Globally, the USDA raised soybean ending stocks to a new record of 98.32 million tonnes. That’s up from the 97.9 million-tonne forecast a month ago and the below the average pre-report guesstimate of 97.82 million tonnes.

Read our deeper analysis of the USDA WASDE for soybeans here, namely export implications and when to sell next.

The next 5-6 days looks to be dry across Argentina, and southern Brazil, with temperatures ranging from the mid 80’s to the lower 100’s (Fahrenheit). There is some rain in the forecast for the 10-15 period for the region, but drier, La Niña-induced conditions will return after that.

Drew Lerner of World Weather Inc. notes that the last two La Niña events had a significant impact on Argentinian production. [2] Expectations that La Niña conditions will persist through to April, albeit weakening along the way.

Overall, this year’s December WASDE was much like many of its predecessors: insignificant. To the January 2018 WASDE we go!

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

Due to travel constraints, I wasn’t able to add futures data to today’s Breakfast Brief. Please click here to view them.

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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