This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Friday’s USDA report was a real bullish surprise for corn and soybeans. The adjustments from November 2024 to January 2025 were the second largest in history for both corn and soybeans. There are a lot of questions about how USDA could have gotten this so wrong since all the yield plots were harvested in plenty of time to be included in the November report release. I will do my best to leave all those questions for another time. What we are left with is a gift from the market. If you have been waiting for a sign to sell, I think this is it. If you have been selling on the rally we have seen since harvest, I think you should continue to do so. If you want to roll the dice on South American weather, do it with a small percentage of your crop not the whole thing. Corn and soybean basis are both at very strong levels at processors in the Southeast so there are good flat prices available.
Early in the growing season of this crop year, USDA was projecting 2.5 billion bushels of corn carryout. On Friday, the number was 1.54 billion bushels which is lower than year before which was 1.738 billion. Over the course of the growing season, we lost more than a billion bushels off the projected carryout and went from a situation of building stocks to lower stocks. The bullish story has been building in corn with strong basis across much of the country but the board was not able to get much momentum higher with soybeans being the boat anchor. USDA made dramatic cuts to the soybean crop and carryout as well on friday dropping yield by a whole bushel. That took carryout down 90 million bushels from 470 million to 380 million. That is still a build in carryout from the year before but no longer the dramatic build that was projected earlier.
These were dramatic changes to the US balance sheet and will readjust the trading ranges for corn and soybeans. But once the market feels it has this priced in, it will go back to trading South American weather. The loss of almost 100 million bushels off the soybean balance sheet is huge, but a couple timely rains in Brazil can make that up rather quickly. It has been dry in Argentina and that started the strength in beans before the report, but if that weather pattern shifts we will see a lot of selling pressure in the beans. This rally also happened at a time when Brazilian farmers can adjust their second crop corn acres. If the weather cooperates, they could go a long way to make up the missing bushels now that the US price is rallying and their currency continues to weaken. Weather still matters as much as anything else. We have to make crops to have a cushion. With prices where they are now, we are probably going to see a shift toward corn acres in the US like we have been fearing. But now at least we can absorb some of those acres better than we could have before Friday.