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December WASDE throws no curveballs

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Small adjustments were made to U.S. and global grain stocks.

The final World Agricultural Supply and Demand Estimates (WASDE) report for 2017 offered few surprises and only small adjustments to U.S. and global grain stocks, and the agency made zero adjustments to its South American production estimates from its November reporting.

“Today’s USDA reports really provided few surprises,” says Farm Futures senior grain market analyst Bryce Knorr. “The cut in corn carryout was right in line with our forecasts. Lower exports for wheat and soybeans are certainly justifiable, though I thought the agency might wait until January to make these changes. The world numbers were even less surprising, with no adjustment to corn and soybean production in Brazil and Argentina the biggest no-show.”

Corn futures firmed modestly after the report was released, up 3-4 cents in late morning trading. That’s because USDA now projects U.S. 2017/18 corn ending stocks 50 million bushels lower, to 2.437 billion total. Globally, corn stocks were projected slightly higher (by less than 0.5%), at 8.0311 billion bushels.

USDA narrowed its projected season-average farm price (SAFP) by five cents on either end, for a range of $2.85 to $3.55 per bushel.

Soybean futures were mostly flat following the report. USDA raised U.S. soybean stocks slightly higher than its November projections, moving that volume from 425 million bushels to 445 million bushels. Global stocks remained virtually unchanged, at 3.6009 billion bushels.

The agency’s SAFP for soybeans is now set at a range between $8.60 and $10.00 per bushel.

USDA also raised its estimates for 2017/18 U.S. wheat ending stocks from November’s tally of 925 million bushels to 960 million bushels. Global stocks saw a slight downward tick to a total volume of 9.8473 billion bushels. Total world consumption is trending 77.2 million bushels higher, thanks to increases in Indonesia, Canada and the EU. Wheat futures were flat to slightly higher following the report.

The agency narrowed its SAFP range of wheat to $4.50 to $4.70 per bushel.

December’s WASDE report brought no changes to USDA’s South American production estimates from November. Those numbers include corn estimates of 1.6535 billion bushels in Argentina and 3.7400 billion bushels in Brazil. Soybean production estimates include 2.0944 billion bushels in Argentina and 3.9683 billion bushels in Brazil.

Knorr says with the December WASDE report out of the way, markets can now focus on some important milestones USDA could set in its January 12 reports.

“The biggest variable right now is weather in South America. Unless that proves more damaging that currently anticipated, it will be hard for markets to put together anything but short covering and bargain hunting rallies,” he says. “Funds hold big bearish bets in corn and wheat that could provide fuel for that type of buying.”

However, funds are pretty much even on beans, which could dampen prospects into the end of the year, Knorr adds.

“That’s not unusual, but it could strengthen basis, perhaps providing a few marketing opportunities,” he says.

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