In last week’s Cattle & Corn Comments, we reviewed the USDA’s January supply and demand information for corn that was contained in the January 11 Crop Production, Grain Stocks, and World Agricultural Supply and Demand Estimates (WASDE) reports. While there were some bearish numbers for corn in those reports, the increase in domestic use was enough to create nearly a $0.40/bu rally in nearby March corn futures over the last week. Further, the bullish enthusiasm in the corn market spilled over to the soybean market following the reports’ release, offsetting some otherwise bearish soybean information in those reports. In the last week, March soybean futures have rallied almost $1/bu.
In the January WASDE report, the USDA raised national soybean yields from 39.3 bu/a to 39.6 bu/a, in-line with expectations (See Table 1). However, production increased by 44-million bushels, more than the 28-million-bushel increase expected, due to a 400,000-acre increase in harvested area. Thirty-nine million bushels of the 44-million-bushel supply increase were offset through higher use estimates. Soybean crush use was raised 35-million bushels, reflecting strong soybean oil and meal demand, and residual use was increased by 5-million bushels.
As a result, ending stocks were increased by 5-million bushels to 135-million bushels, about as expected (See Table 1). Overall, the expected impacts from the changes to the domestic balance sheet were mostly neutral; however, world-ending stocks for soybeans were also reduced by 0.47 mmt. Of note, the USDA increased its forecast for Brazilian soybean production by 1.5 mmt to 82.5 mmt and decreased Argentine soybean production by 1 mtt to 54 mmt. While those changes were mostly anticipated by the market, it is the updated weather forecasts last week that spurred soybean prices higher in the middle of last week.
The weather has trended to drier in Southern Brazil and Argentina over the last couple of weeks, and forecasts are for mostly dry weather for the next week or two and temperatures in the 90s. Thus, rains will be needed by the beginning of February. And, because the U.S. ending stocks remain tight, the market will be sensitive to South American weather until that crop is closer to harvest.