USDA’s January report series published this morning did few favors to grain prices, with 2023 corn and soybean yields coming in much higher than pre-report analyst guesses had estimated and replenishing domestic supply pipelines after three consecutive years of tight supplies. The larger global wheat balance sheet limited 2024 winter wheat sowings in USDA’s first look at 2024 wheat production.

Brazilian corn and soybean production decreased, but not by as much as the trade had been hoping. The slightly larger Argentine soy crop and unchanged corn harvest projection means that USDA expects South America will have another record-breaking export season in the current calendar year.

As a result of these findings, corn prices fell nearly 2.5% in the moments following the report’s release. Soybean futures tumbled 2% lower. Chicago soft red winter wheat futures fell over 2.2% and Kansas City hard red winter wheat futures drifted nearly 1.7% lower. Minneapolis spring wheat futures traded 0.9% lower.

“Nearby Mar24 corn prices tumbled through a notable support level with the news of higher 2023 corn yields and smaller than desired reductions to South American corn crops,” according to Farm Futures grain market analyst Jacqueline Holland. “At last glance, prices traded near the $4.42/bushel level (and falling), notching a fresh three-year low. Corn prices tried to break below technical support at $4.50/bushel earlier this week, but today’s USDA report findings provided the fundamental news that will likely keep prices trading between $4.50/bushel and $4.40/bushel in the absence of improving domestic usage rates over the next month.”

Corn

USDA was bullish on corn production versus previous analyst estimates in today’s report. The agency showed production at 15.3 billion bushels, based on a record average yield of 177.3 bpa. That was above trade guesses of 15.226 billion bushels, with average yields noticeably lower at 174.90 bpa.

USDA increased its total corn usage by 75 million bushels to 14.6 billion. That is based on a 50-million-bushel bump in ethanol use and a 25-million-bushel bump in feed and residual use. Supplies rose more than usage, however, so 2023/24 corn ending stocks moved 31 million bushels higher. The season-average farm price eased 5 cents lower to $4.80 per bushel.

Quarterly stocks were moderately higher year-over-year after moving from 10.813 billion bushels as of December 1, 2022, to 12.169 billion bushels. That was also a bit above the average trade guess of 12.050 billion bushels.

Ending stocks for 2023/24 were also up, from 2.131 billion bushels in December to 2.162 billion bushels. Global ending stocks also shifted higher, from 12.410 billion bushels last month up to 12.804 billion bushels.

“There is a lot of corn in the U.S. right now,” Holland says. “There have been few farmers I’ve spoken with over the past six months who did NOT share that their 2023 corn yields were better than what they had been expecting, so a 177.3 bushel-per-acre (bpa) national yield was not surprising to this analyst (especially after our grower survey indicated 176.1 bpa earlier this week).”

The Quarterly Grain Stocks report found lower than expected beginning stock volumes for 2023/24 corn supplies, but so far 2023/24 corn usage is struggling to stay ahead of these large stocks, Holland adds.

“Higher domestic feed and ethanol consumption indicated in Friday’s report helped to limit the price bleeding following the report release, but this corn market will need to see higher exports, planting troubles in Brazil, or more ethanol usage in the coming months to help boost prices back above the current multi-year lows,” she says.

Soybeans

USDA modestly increased its estimates for 2023 soybean production by 35 million bushels to 4.2 billion, with average yields estimated at 50.6 bpa. As with corn, that was above the average trade guess of 4.134 billion bushels and 49.9 bpa, respectively. USDA noted particular increases in Illinois, Missouri and North Dakota in today’s report.

Soybean stocks increased by 35 million bushels to 280 million. The season-average farm price slid 15 cents lower to $12.75. Soymeal prices also shifted 10 dollars lower from a month ago, to $380 per short ton, and soyoil prices faded 3 cents lower to 54 cents per pound.

Quarterly stocks eased slightly lower from a year ago, from 3.021 billion bushels as of December 1, 2022, to 3.000 billion bushels. Ending stocks for 2023/24 moved from 245 million bushels in December up to 280 million bushels.

In South America, Argentina’s soybean production potential moved from 1.764 billion bushels in December up to 1.837 billion bushels. For Brazil, USDA docked the country’s production potential from 5.915 billion bushels in December down to 5.768 billion bushels this month.

“Brazil’s soybean crop will peak harvest activity by the end of the month,” Holland says. “Harvesting activity began early in Mato Grosso over the Christmas holiday season as spring drought in Brazil helped to speed up maturation rates.”

But for a good portion of the crop, the past few weeks of moderate temperatures and wet weather has occurred during peak pod fill periods, all but guaranteeing a stable production year for Brazil, Holland adds. Production may not hit trendline yield estimates, but it is still going to be a record large crop that will dominate the global export pipeline, she says.

“And don’t forget about Argentina – USDA may not have raised its estimates for Argentine soy exports in Friday’s reports, but it did increase the 2023/24 Argentine soy harvest to 1.837 billion bushels – doubling the volume of last year’s harvest in the South American country,” Holland notes.

Globally, world ending stocks increased slightly, from 4.196 billion bushels in December to 4.210 billion bushels in January.

Wheat

USDA lowered wheat ending stocks by 11 million bushels to 648 million due to decreasing supplies more than offsetting lower usage. Seed use fell 1 million bushels to 64 million. The season-average farm price fell 10 cents per bushel to $7.20.

Winter wheat seedings are expected to decrease from 36.999 million acres in 2023 to 34.400 million acres in 2024/25. All major types (hard red winter, soft red winter and white winter) are expected to face acreage declines.

The pre-report trade estimates had only factored in a 2% decrease in winter wheat acres from year ago sowings. But USDA’s 2024 winter wheat sowings figure of 34.4 million acres was a drastic 6% decrease from year ago winter wheat acreage, Holland points out.

“But this should not have come as a surprise to market watchers,” she says. “Last fall during peak winter wheat sowing, Chicago wheat futures traded nearly 40% lower than year ago values. Kansas City futures lost 30% of their value during that same period.”

Planting winter wheat is not going to provide extra returns to growers in 2024 as it did during the past two growing seasons at the current price levels, Holland suggests.

“And as large Black Sea shipping volumes and a strong dollar continue to loom over the market, don’t expect winter wheat acres to be a significant competitor in the 2024 acreage battle this spring,” she says.

World ending stocks for 2023/24 increased from 9.486 billion bushels in December up to 9.554 billion bushels in January.