Corn
USDA left the US balance sheet alone on corn. There are usually no changes to the supply side in the December report, but with all the issues unique to this year some in the trade had expected at least some small adjustments to production or demand. This sets up a very important January contract as only 92% of the corn was harvested as of Monday. Notable states include North Dakota at only 43% harvested, WI at 74% and MI at 74%. There could still be upwards of a billion bushels of corn left in the field and winter storms moving across the country. It is going to be a long time until we have a handle on the size of this crop and at that point we are going to be looking to new crop acres. USDA did adjust world carryout up slightly but was within the range of expectations albeit on the higher end.
I believe corn will make a run at $4 before March goes off the board, but to get much higher than that we are going to need something other than the US crop to get us there. It could be weather in South America or something related to trade. Basis continues to be historically very strong.
Soybeans
Like corn, USDA made no changes to the US balance sheet but raised world carryout slightly which came in around expectations. Soybeans have found strength of late on both continued dryness in Argentina and some positive updates on trade talks with China allowing some new soybean imports. December 15th had loomed as it was the date another round of tariffs were scheduled to go into effect, but today the US announced they would be delaying that scheduled increase to continue negotiations in good faith. Basis continues to improve in the Southeast and the board is right at the $9 level. If you need to generate cash soon, now is a good place to start scaling in!
Wheat
USDA made some significant changes in the wheat balance sheet (compared to nothing in corn and beans). They dropped US carryout just below 1 billion bushels. The market was unable to gather more than a slightly higher close. The strength in the US balance sheet comes mostly from the soft winter wheat due to another drop in acres. The world balance sheet continues to pressure as world stocks remain adequate. Australia is in a historic drought but the Russian crop looks to be getting bigger.
New crop basis should expect to see a return to more historic levels this year since we have had a return to more normal acres. That is as long as we do not have major issues with the crop. We have the acres planted but we are a long way from harvest. Wheat should be hedged when we get to the $5.50 level.
Cotton
Cotton was the lone commodity to get a good boost from USDA as they dropped yield another 24 pounds per acre (after a 65 pound drop last month) dropping carryout 0.6 million bales. The world carryout was also reduced. The market has also seen some positive price action with China’s move on trade last week lowering export restrictions that is being viewed as a goodwill gesture during negotiations. We need further progress on trade to keep the uptrend. I would be a seller of cotton as we approach $0.70.
