This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
There are several different ways Monday’s USDA report was unprecedented, and none of them were good for producers. Corn was the most bearish, which was easily seen by the negative market reaction. The market was expecting a reduction, but what we got was the biggest November-to-January production increase on record in corn and the largest bearish surprise for Dec. 1 corn stocks since 1988. USDA only increased corn yield by half a bushel but increased harvested acres by more than 1.2 million and even made some changes to the 2024 crop (the crop we harvested more than a year and a half ago).
On soybeans, the changes were not nearly as dramatic as they were in corn, but the changes they did make were all bearish, like corn. The market was expecting a downward revision in the crop size, but USDA increased it, though only by 9 million bushels in an almost 4.3-billion-bushel crop. Exports were reduced, resulting in a larger increase to carryout than anticipated by the market.
USDA made even smaller changes to its wheat estimates, but once again, they were nearly all bearish. Dec. 1 wheat stocks came in higher than expected, which prompted USDA to lower its feed and residual usage estimate. Its initial estimate of U.S. winter wheat plantings came in higher than expected, adding to the bearish tone. U.S. wheat stocks are seen building, as are world stocks, with increases in production from Russia and Argentina. While wheat planted acres were revised higher, they are typically reduced from the January plantings report based on crop conditions and the market.
Overall, Monday was a rough day for the grain and oilseed markets. Completely setting aside any accusations of intentional manipulation, there seems to be a pattern of increasing revisions of previous data and dramatically large surprises from USDA. Surprises from new data are one thing, but multiple large revisions to previous data imply growing unreliability of the government’s data. The government being shut down right in the middle of harvest, which was the most crucial data-collection period, probably contributed in this case. Dramatic and careless staff reductions at USDA probably also contributed. This will have longer-term implications, as many of the people who left were probably the ones who had good options elsewhere, meaning they may not have been the ones who needed to leave.
We are waiting on biofuels rules from the administration, and while there have been ups and downs, the market is now expecting some good news on that front. We also do not have such large carryouts of anything right now that the market can ignore a weather or production issue anywhere in the world. Wheat is harvested somewhere in the world every 30 days, so weather can be a factor at any time. Cheap prices have increased demand for grain and oilseeds.