Analysis Grains
USDA makes significant cuts in corn stocks
The news dominating the grain market is the Wasde report. For corn, the USDA takes a fairly firm stance in the December edition of the report. There is also an undertone regarding wheat in the Wasde report, but the report is neutral for soybeans. News from China had a more bearish tone, but it did not really affect the market.
On the Matif, the December contract for wheat closed at €218.75 per ton. The March contract closed €1.75 higher at €229 per ton. On the CBoT, the December wheat contract rose by 0.1% to $5.42 per bushel. Corn showed a stronger performance, increasing by 1.5% to $4.40½ per bushel. Soybeans also rose and closed 0.5% higher at $9.94¾ per bushel.
Yesterday evening, Netherlands time, the USDA released the Wasde report for December. The report is decidedly bullish for corn. The final corn stocks in the US have been reduced by 200 million bushels to 1,738 million bushels. This is significantly more than the 165 million bushel reduction that the market expected. The US is exporting 150 million tons more corn than predicted in the November edition of the Wasde report. The most notable increase is in the use of corn for ethanol by 50 million bushels. The USDA did not make significant adjustments to the crop estimates for South America, but it also increased the share of corn going into ethanol. The world ending stocks of corn are now estimated at 296.4 million tons, well below the 303.6 million tons expected by the market in the Reuters survey.
Tight Wheat Market
For wheat, the USDA sends a moderately supportive signal. For the EU, the USDA reduces the harvest by 1.3 million tons to 121.3 million. Harvest figures from various member states are lower than previously expected, according to the USDA. Wheat yields in Brazil are also lower, as indicated by harvest data. The EU and Russia will export less wheat, but this is partially offset by increased exports from the US and Ukraine. The USDA explicitly mentions export quotas. The volume traded on the world market has been reduced by 1 million tons to 2123.7 million tons. The total volume available this season (beginning stocks plus production) has been increased by 600,000 tons to 1,060.4 million tons due to an adjustment in the beginning stocks. The ending stocks of wheat are estimated to be 300,000 tons higher at 257.9 million tons. This is the smallest stock since 2015/16, according to the USDA.
For corn and wheat, the USDA sends a signal, but for soybeans, the tone is fairly neutral. The production for Argentina has been increased by 1 million tons, but for Brazil, the harvest remains the same. Unlike corn, the use of soybean oil in biofuel remains unchanged. The world ending stocks of soybeans have been slightly reduced to 131.9 million tons compared to 132.3 million tons in the November edition of the Wasde report.
Trade Concerns
It may be overshadowed by the Wasde report, but there were of course other developments in the grain trade. The EU exported 10.24 million tons of wheat until December 8. Last year, it was 14.41 million tons. According to Chinese customs data, China imported 7.15 million tons of soybeans in November. This is the lowest export for this month since 2018. Analysts believe that the decrease in soybean imports is a sign that Chinese processors are concerned about trade relations. During Trump's first term, soybeans were heavily affected, and processors fear a repeat of that scenario.
