Supply and demand projections for the recently completed U.S. corn, soybean and wheat harvests were largely unchanged in USDA monthly report released on Friday, which disappointed soybean traders who were looking for a small reduction in supplies.

Soybean futures in Chicago dropped several cents shortly after the report to trade about unchanged for the day. Corn futures also slipped to trade about unchanged for the day after being up 2 cents earlier.

The winter wheat markets barely moved and spring wheat dropped about 2 cents.

Corn ending stocks tops trade, Farm Futures estimate. (Photo: DarcyMaulsby/Thinkstock)

“I thought the agency could have trimmed its estimate for soybean ending stocks due to strong exports, so that was a bit of a disappointment, which is why the market is starting to leak lower,” said Bryce Knorr, Farm Futures senior grain analyst. “Soybeans are at a turning point, trying to hold on to their bullish uptrends in both old and new crop. Any hint of cancellations from China could send the market lower, but so far that’s not happening, despite what looks like a good South American crop.”

A recent robust export program, particularly to China, had traders expecting USDA to trim 10 million to 20 million bushels off of the 2016/2017 soybean ending stocks. However, USDA left unchanged the exports at 2.05 billion bushels and ending stocks at 480 million.

“China’s imports in the first three months of the marketing year were slow, so it may need to keep buying just to keep crush running ahead of the Lunar New Year, when meat consumption surges,” said Knorr.

USDA left unchanged corn ending stocks at 2.403 billion bushels and wheat‘s at 1.143 billion. Traders, on average, had expected a small increase in the corn stocks and a small reduction in wheat.

In South America, USDA kept Brazil’s soybeans at 102 million metric tons and Argentina’s at 57 million. It did raise Brazil’s corn crop to 86.5 million tons from November’s 83.5 million, but left Argentina’s at 36.5 million.

“Conditions in Brazil look favorable, but parts of central and southern Argentina are trending drier. That will be the key area to watch in coming weeks,” Knorr said of the soybeans there.

In the world use and supply tables, USDA raised corn ending stocks to 222.25 million metric tons from November’s 218.19 million; soybeans went to 82.85 million from 81.53 million and wheat to 252.14 million from 249.23 million.

The increases in the world numbers are bearish, said Knorr, who noted the gains were due to better crops, including the corn in Brazil and wheat in Australia.

Australia’s wheat crop was raised to 33 million metric tons from November’s 28.3 million. An increase was expected as Australian sources had been forecasting a big harvest. No changes were made to the Black Sea wheat crops while Canada’s wheat was raised slightly.

“Supplies remain burdensome, which is why the market is having trouble,” said Knorr of the crops. “That said, the outlook for prices may depend on whether investors want to keep adding commodities to their portfolios as a hedge against inflation. Watch next week’s discussion from the Federal Reserve, when an increase in interest rates is all but certain.”