Instant Reaction to the January WASDE Report

It time for the January WASDE report.

How is everyone feeling?

Apologies for missing last month, but my wife and I had our first child on Dec. 12.

Ahead of the report, grain prices were mostly in the green. But let’s be honest with ourselves…

We’re nowhere near where we want to be when it comes to price.

Even my one-month-old knows that the USDA isn’t going to do us too many favors. We’re expecting an uptick in global inventory levels, particularly on the wheat side.

Ahead of the report, I had one expectation: Even though the weather in the U.S. has been brutal, it’s not going to deter the USDA from telling us that global inventory levels are at high levels.

This is “death and taxes” style expectations when it comes to the USDA.

There’s a feeling of permanence to the bearish sentiment coming from this agency in the January WASDE report.

Here at the floor at CBOT, March SRW wheat prices were sitting at $4.3675 before the release of the report. Front-month corn prices were hovering at $3.49 per bushel, and soybeans were trading at $9.46.

Let’s dive into the report.

Corn Prices Stuck at $3.50 Range Forever

Let’s just get this one out of the way.

Corn prices fell 2.25 cents today in what is turning into my own personal version of Groundhog Day.

It wasn’t.

What mattered in the January WASDE report?

The story today in the report was the yield figure.

The USDA says that yields will come in at 176.6 bushels per acre. At this rate, there will be so much corn that we’re going to be eating it forever.

The yield number is a full 1.2-bushel increase from last month’s estimate.

Analysts had set a range between 173 bushels and 177 bushels. The average trade estimate ahead of time was 175.4, so today’s figure was certainly a surprise.

On the carryout side, the USDA pegged the figure at 2.477 billion bushels of corn. They also said that U.S. production would be 14.60 billion bushels, ahead of the average trade estimate of 14.58 billion.

With headlines centered on South American weather, the USDA numbers disappointed. For all the talk about delays in planting, the USDA says that the Argentine corn crop will come in at 42.0 million metric tonnes.

They said that Brazil’s corn crop will be 95.0 million tonnes. Both of these numbers were well above average analyst expectations.

Wheat Slumps after January WASDE Report

On the wheat side, US carryout was well ahead of analysts expectations. The USDA hiked its carryout figure from 960 million bushels to 989 million bushels. The new stocks number was well ahead of analysts’ expectations.

In fact, the average analyst forecast called for a carryout of 959 million.

How did this play out for prices?

It went poorly.

SRW contracts at 12 p.m. CST cratered. Wheat prices fell 11.75 cents to hit  $4.215. May contracts fell another 11.5 cents. In Kansas City, March 2018 prices fell 13.5 cents to tick just under $4.27. Spring wheat prices fell 12.25 cents to close below $6.17 per bushel.

Soybean Yields See Cut

Soybean prices were up slightly thanks to today’s WASDE report. March prices added 3.75 cents and hovered around $9.54 per bushel. The numbers are still a far cry from the $10.00 levels that we saw recently.

There was a solid cut to yield expectations in this report, and South American production numbers were slightly below trade expectations.

The USDA projects that soybean yields will come in at 49.1 bushels per acre. That figure was a 0.4 cut from last month’s estimate and the average trade expectation.

The agency also said that carryout for soybeans sits at 470 million bushels. That figure was slighly below trade expectations, although it was an increase from last month’s 445 million figure.

Global carryout is slated to come in at 98.6 million metric tonnes. That figure is a slight increase from the 98.32 million pegged last month.

Other January WASDE Report Observations

First cotton…

Second, you can’t please everyone.

Back in my day, “we called sandwiches Flat Freddies, and they cost 4 playing cards of Ike.”

We’ll be offering additional insight into the WASDE report later this afternoon.

Right now, we have to plug all this data into our models and start thinking about where price opportunities may emerge in the weeks and months ahead.

About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.

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