Chicago Grains Rise Following USDA Report, But Will It Last?

12/01/16 -- General: A big day, with a deluge of data from the USDA to wade through. Bear in mind also that fund money was sitting on some fairly large open short positions in wheat, corn and beans heading into today's reports, so nervousness may have played a part in a bit of volatility. Crude oil continues the pressure in the outside markets with new lows again today as it seems inextricably drawn to test a fall below the $30/barrel mark.

Soycomplex: US Dec 1 stocks were 2,715 billion bu, which were 27 million below the average pre-report trade estimate. US 2015 harvested acreage came down 600,000 million acres, and yield was reduced to 48.0 bu/acre. That took the US 2015/16 crop down to 106.95 MMT versus the 108.35 MMT forecast a month ago, and now little different compared to 106.88 MMT a year previously. There were no changes to output from Brazil (100 MMT) or Argentina (57 MMT). China's crop was increased to 12 MMT (up 0.5 MMT from last month). Chinese imports were unchanged at a record 80.5 MMT. Brazil's exports were unchanged at 57 MMT, Argentina's were raised from 11.25 MMT to 11.8 MMT and those of the US lowered from 46.68 MMT to just under 46 MMT. World ending stocks were estimated at 79.28 MMT versus 82.58 MMT a month ago and the average trade idea of 82.57 MMT. The change in relationship between beans, meal and oil was noted. "Since reaching a low in September, the share of oil’s value in soybeans has climbed to near 33 percent in December," they said. "While this is still below the 20-year average of 35 percent, it marks the highest value-share for soybean oil since May 2013. Prices for soybean oil, which reached a 10-year low in late 2015, have begun to rise in conjunction with other vegetable oils. Reduced global supplies of rape and sun oil, along with slower growth year-to-year in palm oil production, hold the potential for a tighter market and continued price strengthening for all oils. Demand for soybean oil is particularly keen, in part due to its relative abundance as well as the narrowing of its price premium to palm oil," they noted. Under the daily reporting system the USDA also revealed 140,000 MT of US soybeans sold to unknown destinations for 2015/16. Jan 16 Soybeans closed at $8.90 3/4, up 9 3/4 cents; Mar 16 Soybeans closed at $8.74 1/2, up 13 1/4 cents; Jan 16 Soybean Meal closed at $274.70, up $5.90; Jan 16 Soybean Oil is at $29.01, down 7 points.

Corn: Corn closed around 6-7 cents firmer, helped by a USDA report that can maybe best be described as "not as bearish as it might have been". That appeared to encourage some profit-taking, helped by spillover support from wheat and soybeans. "World corn production for 2015/16 is lower with reductions for India and South Africa more than offsetting the gain for Canada. Global trade is little changed overall. Exports are raised for Brazil and Canada but lowered for the United States and India," was their opening gambit. India's corn crop is now expected to be the smallest since 2009/10 at 21 MMT and is 1.5 MMT below that forecast a month ago and 2.7 MMT under what was produced in 2014/15. Production in Brazil (81.5 MMT) and Argentina (25.6 MMT) was left unchanged from last time. Canadian output was raised by 1.3 MMT to 13.6 MMT, and South Africa's lowered from 12.75 MMT to 12.0 MMT. World 2015/16 ending stocks were almost identical to the 211.9 MMT predicted a month ago at 211.85 MMT. The average trade guess for those were 212.51 MMT. US Dec 1 corn stocks came in 34 million bushels below the average pre-report trade estimate. "Since the release of the November WASDE report, US and Black Sea corn quotes have dropped slightly. U. corn export prices have been pressured by a relative lack of competitiveness. In comparison, Argentine and Brazilian corn quotes are up (and are now above US Gulf prices), supported by continued strong foreign demand and seasonally tightening old crop supplies," they said. Mar 16 Corn closed at $3.56 3/4, up 5 cents; May 16 Corn closed at $3.62 1/4, up 4 3/4 cents.

Wheat: For once wheat led the pack higher. The USDA's winter wheat plantings report, separate to their WASDE report, is what the market focused on. That had US all winter wheat seedings down to the lowest since 2010, including a drop to at least a 30 year low in plantings of HRW wheat, according to Reuters. The total winter wheat area of 36.61 million acres is 7.2% lower than a year ago and more than 2 million under the lowest trade guess. The USDA estimated seedings of HRW wheat, the largest wheat area by class, at 26.5 million acres, the lowest on records going back to 1986/87. SRW acreage was shown at 6.72 million, while the range of estimates was 6.40 to 8.539 million and the average guess 7.166 million. On the flip side, the US Dec 1 wheat stocks figure of 1.738 billion bushels was a five-year high that exceeded market expectations by 40 million bushels. The WASDE report provided the bearish input. "The projected glut in 2015/16 global wheat supplies is pressuring export prices to the lowest level since July 2010. While world production and consumption are forecast at a record and global trade at a near-record, stocks continue to build. Although lower prices are stimulating additional demand, it is not enough to offset burdensome supplies. Exporter stocks are generally available to the world, and are therefore inversely related to global prices," they said. US 2015/16 wheat exports were left unchanged at 22 MMT, with Europe's lowered 1 MMT to 32.5 MMT. Argentina's exports were upped 1 MMT reflecting recent changes in duties and quotas, Canada and Ukraine both got a 500,000 MT increase to their exports in 2015/16 to 21 MMT and 15.5 MMT respectively. World wheat ending stocks were raised from 227.3 MMT to almost 230 MMT. Mar 16 CBOT Wheat closed at $4.81 1/4, up 12 1/4 cents; Mar 16 KCBT Wheat closed at $4.78, up 15 3/4 cents; Mar 16 MGEX Wheat closed at $5.05 1/2, up 10 3/4 cents.