January USDA Report

The Jan USDA supply and demand update is a very important one. All numbers are up for review, yield, harvested acres, domestic demand, export demand. We also get grain stocks as of Dec 1 and South American production estimates. This report used to be considered “final” for the US crop size. With all the turmoil we have had this year and all the times USDA has blindsided us, we were hoping (maybe foolishly) we would get some semblance of closure on this report or at least a step in that direction. In trying to put a positive spin, I will say we got the second best option. They did not help us, but they did not hurt us. They undermined their own credibility and kicked the can further down the road. Before the report was released, USDA said that corn remaining in the field unharvested, would be counted the same as corn in the bin. I will not waste anymore space on why that is so preposterous. After the report was released, USDA said they were going to resurvey in the spring all those respondents who reported unharvested acres. They are going to release updated acreage, yield, production and stocks estimates this spring.

USDA did not make large changes, but they made strange changes. They made small bearish adjustments but the market did not react bearishly. I think this illustrates the amount of credibility USDA has lost this year. Corn stocks were slightly below expectations, but beans were above. But how much of those stocks are left in the field? We do not know, so that number does not mean much. USDA did lower harvested corn acres by .333 million but they raised yield!! Where did that come from? Corn closed higher anyway. Dropped bean harvested acres but raised yield too! They did lower carryout on corn and wheat but left beans unchanged. In cotton, they raised yield too, which was a shock but dropped harvested acres 71,000, enough to drop carryout. They left South American production unchanged and slightly raised carryout from last report but still well below last year in corn, beans and cotton.

I was hoping for help from USDA today, but I well settle for enough loss of credibility that hopefully they at least cannot hurt us more for a while.

What To Do?
Market will turn focus back to China and South American weather. World economies continue to look stronger. The deal with China should be signed next week in Iowa. I do not expect much of a change at its signing, but I will be glad to have it behind us. The market should have very good support at these levels now. I look for more sideways to higher trade. Old crop corn is going to make a run at $4. Sell old and new crop close to $4!! Beans are going to churn higher. Scale in sales at $9.50+. Basis gets stronger every week on beans. New crop has potential to $10. Get started just below that. Hedge new crop wheat from here up to $6 on the board. We need to be aggressive at high $5 levels. Cotton should be sold over $0.70.