December USDA Report

USDA made very few changes to the balance sheets today. In a normal year they do not typically adjust yield on this report but the market was thinking there was a small possibility they might this year. They typically make yield adjustments on the Jan report. The changes they made to corn and beans were pretty neutral. They increased corn exports and increased bean domestic crush. Leaving bean exports unchanged was a bit of a surprise but that sets up for a big adjustment on the Jan report when yield may also be adjusted. They also left South American crop estimates close to unchanged. Wheat world carryout came down more than expected. The big shock came from cotton where they upped exports and dropped yield significantly due to the Texas crop failure. Markets were expecting a 6.7 million bale carryout and USDA gave us 5.5 million bales.

USDA once again kicked the can down the road leaving most things unchanged. In the last few months, we have gained a lot of world demand and at the same time have trimmed US supplies pretty significantly. We still have a lot of growing season left in South America. I look for corn and beans to stay in the recent ranges until we know more about the size crop in South America. Many analysts have not trimmed much off the crop estimates down there yet leaving lots of room for adjustments lower. This is a weather market so volatility is expected which we have experienced over the last two weeks as South America did pick up some rain. Where we go depends very much on the weather over the next few months. If the weather trends a lot wetter, there is some downside. The extra demand we have picked up should help support. They have some big moisture deficits to make up. If it says dry there is some significant upside. The bean market wants to know more about the possible crop losses before it will be able to push through the $12 level.

In addition to weather, the markets are also going to continue to trade currencies. As the Chinese currency and Brazilian currency get stronger, that will really help add to the bullish current in the corn and beans. Wheat will be watching the Russian ruble and Euro.

Another exciting thing in this market is the new crop acreage battle. For the first time in a few years the market is going to be trying to encourage corn and bean acres rather than discouraging them. That puts the market more on edge for any hint of weather problems.

The fundamentals seem to be on our side with good demand and lots of growing season left in South America time also seems to be on our side as well. I think you can be patient here with more sales. Basis is getting stronger on beans. It has leveled off a bit in corn as the Midwest finally gets corn moving, but the rail has not performed well so just be ready for any rail hiccup to move corn. If you have gotten a little bit of new crop corn above $4 and beans above $10, I think we can afford to be a little more patient now. I would still hedge new crop wheat above $6. You can work orders on new crop beans at $10.99 and corn at $4.50.

Make sure you scroll down below the chart to look at the picture. When you read what it is, it will blow your mind…

When completed this will be the biggest hog farm in the world. It will house 84,000 sows and produce 2.1 million pigs per year in Nanyang, China. This is why the Chinese need soybeans and corn. They are not building back small backyard hog producers. They are building mega farms.