Grains ended sharply lower Friday with livestock higher.
Corn Sharply Lower as USDA’s Corn Yield Disappoints
Corn futures ended lower on Friday in response to USDA’s modest yield cut in the November crop production report. Arlan Suderman, chief commodities economist with StoneX says USDA only lowered national corn yield .7 bushels per acre to 186. While this number matched their firm’s estimate it was two bushels higher than the average trade guess.
Suderman says the market was expecting deeper cuts due to the amount of disease and late season stress in the corn crop. “There were a lot of lower yield estimates. That was legit. But when you survey thousands of data points, you also realize that there are some really, really good yields out there, some areas that really blew away their records, previous records. And those don’t get talked about too much. And those don’t get reported publicly,” he explains.
Will Corn Yield Fall Into the January Report?
So will the bulls get what they want in the January report? Will USDA cut yields into the final report like they did last year? Suderman says that’s possible. “I would say probably so because that’s what history shows us when I look back at the last 32 years of history. Big crops keep getting smaller right up into the January report. So I anticipate it will. The question is how much? Right.” He also thinks USDA will lower yield based on the large number the agency is using for feed and residual.
How Much Would Corn Yield Need to Fall to Impact Prices?
Suderman says with a 2.15 billion bushel ending stocks figure for 2025-26, national corn yield would have to drop several bushels to make a measurable difference. “Well, it really comes down to how much fluff is in the feed usage number because the more yield comes down you’ve got to cut feed usage to offset it,” he says. To get that number down to a halfway reasonable level, he thinks yield will need to drop below 183 bushels per acre on corn. He says that could happen but the market now has to wait and see if USDA does it.
Is Corn Fairly Prices for a 2.15 Billion Bushel Carryout?
The corn market rallied going into the USDA crop production report on hopes for a bigger yield cut. So now that the bulls have been disappointed where do corn prices need to fall to work in a 2.15 billion bushel carryout? Suderman says, “Ending stocks are the same place, basically, just a little bit higher than where they were at the September report. But look how much higher prices are. So the market is obviously assuming that supplies are going to get tighter or they need to see hard evidence of that. USDA has a record export number in there already, and we don’t know what export sales are. We won’t be caught up on export sales until January 2nd from USDA. But export inspections do currently justify the export numbers there. And so the question is, what about feed usage and ethanol numbers?”
Soybean Bulls Disappointed by Lower Export Estimate
Soybean bulls were also left disappointed as USDA lowered exports by 50 million bushels in the report, down to 1.64 billion bushels. The agency acknowledged the China soybean purchase commitments in the forward of the report but explained if China bought U.S. soybeans that would shift business from other export customers to cheaper Brazil and Argentinian soybeans. “USDA is assuming that U.S. soybean prices will be higher and the U.S. won’t be able to compete for that business,” he says.
Daily Export Sales Backlog Shows Limited China Soybean Buys
The bulls were also looking for proof of China soybean purchases made since the U.S. and China struck their trade framework October 30. However, Suderman says looking at China and unknown purchases after that date they fall short of expectations. “It totals a little better than 24 million bushels. And that’s about 5.5 % of what China committed to buying by the end of December, if you believe what the White House says. China still refuses to confirm that number. And so that’s the discrepancy. And Chinese buying so far has been very sluggish and slow. All the buying is basically by state grain buyers.”
Why Isn’t China Buying?
Suderman says private crushers in China aren’t buying U.S. soybeans because its not economical. “U.S. soybeans are priced roughly a $1.50 above Brazilian soybeans right now for old crop. And new crop, Brazilian supplies for delivery in February and later are much cheaper than cheaper than U.S. soybeans. So state grain buyer is going to have to do it all to go into the reserve. And right now they’re not showing any evidence in that. In fact, their CASDE report, which is the equivalent of our WASDE report that was released earlier this week, showed zero evidence of an increase in state grain buying in their balance sheet.” he adds.
When Will China Buy?
So is China not buying U.S. soybeans because they have a “market consideration” clause in the trade agreement with the U.S. or is it something else? Suderman says, “I do think they’re waiting for a tariff decision from the courts. But I also think all of the sudden after the fourth plenum meeting of the Chinese Communist Party to assess what’s happening in the country. Ever since then, Xi was eager to get an agreement, an agreement that he doesn’t necessarily intend to keep based on China’s history, but he wanted to calm the waters. He wanted to avoid the extra 100 % tariffs that really
would have put their economy in trouble.” He thinks its just a matter of time before the trade war resumes.
Soybean Prices to Deflate?
Soybean prices had hit new highs for the move and 17-month highs going into the report. So, with bulls disappointed how far will prices fall in response? “U.S. ending stock projections are 290 million bushels, very close to 300 million bushels where they were at two months ago. But prices are well over a dollar higher. So to justify that higher price, we have to see something change in the dynamics. We need to see a legitimate weather threat to the Brazilian crop developed and or legitimate pickup in Chinese buying and shipments of U.S. soybeans. That needs to happen sooner. or this market will tire of holding prices at these levels,” he explains.
Wheat Falls on Surge in Global Stocks
Wheat futures also ended sharply with corn and soybeans but also in response to larger domestic and global ending stocks in the WASDE. USDA raised U.S. carryout 58 million bushels but the bigger shock was the hike in world carryout by 7.4 MMT to 271.4 MMT. Suderman says this is extremely bearish for the market.
Cattle See a Dead Cat Bounce?
Cattle reversed a lower opening to close slightly higher on the day but was it any more than short covering or a dead cat bounce? Suderman says the market has been headline driven and with President Trump’s plan to lower beef prices the funds have been liquidating so this may be just a temporary reprieve from the selling. Cash was also lower in the fed market at $228 live down $3 and Northern volume dressed was at $351, down $8.
