Narrow Column US corn crop speculation could be the biggest threat to the market on Thursday – Brown
Written by Karen Brown
NAPERVILLE, Illinois, Jan. 11 (Reuters) – Chicago corn futures are trading at a decade high for this time of year while soybeans are at an all-time high for this date, creating some vulnerabilities ahead of the USDA data attack.
The agency’s reports, due for release Thursday noon EST (1700 GMT), could cause wild volatility in CME futures if industry analysts incorrectly forecast key numbers. The most important US corn crop may be more poised for a market failure due to the alarmingly low range of speculation.
Daily reactions to CME futures reports are closely related to US corn and soybean production results, and quarterly US stocks are likely to be the second layer of interest. last year, Analysts practically nailed it All of these numbers, which leads to a much calmer trade.
But this year, analysts allowed a range of 156 million bushels in the 2022 U.S. corn harvest, the smallest for the January report in 16 years. This range is only a third the size of the five-year average and is driven by narrow guesses in both area and yield.
Analysts peg the 2022 corn harvest in the United States at 13.933 billion bushels, basically unchanged from the previous forecast. The soybean harvest is expected to come in at 4.362 billion bushels, up 20 million from November. The 115 million bushels of soybean production is dead in the five-year average for this report.
US revenue
Analysts’ range for corn yield in the US is the lowest in seven years and for soybeans it is the lowest in at least 13 years. Corn and soybean production are expected to come in at 172.5 and 50.3 bushels per acre, respectively, up from 172.3 and 50.2 in November.
American farmers did not have a remarkable corn crop primarily because of the drought in the western regions. But this has no effect on whether the January corn yield is higher or lower than it was in November, since the previous results in the poor-yielding years were divided evenly.
But the November-January soybean yield trend is very strong with almost a 90% chance of a higher yield in January when yields were already below trend. This somewhat proves the validity of the trading assumption.
However, the slight changes analysts made against November’s revenue are very uncommon, but not unprecedented. January’s 2021 corn yield was unchanged from November, but other than that, the trade is eyeing the smallest January move in the corn crop in 14 years. Soybean crop turnaround will be the lowest in 15 years.
In the past decade, the January and November corn crop differed by less than 1 bpa only three times: for the 2015, 2016 and 2021 crops. The maximum difference between November and January for soybeans was 0.5 bpa, where it has occurred three times in the past 10 years.
The November-January bean yield trend is divided over the past decade, increasing and decreasing five times each. Corn yields have fallen in January versus November in six of the past 10 years.
Quarterly inventory
Analysts expect US corn stocks 1, the end of the first quarter of 2022-23, at a nine-year low of 11.153 billion bushels and down 4% from a year earlier. Soybean inventories on December 1 will be at 3.132 billion bushels, down in part from a year ago and up 6% from two years ago.
US wheat inventories as of Dec. 1, the midway point between 2022-23, are expected to be at a 15-year low of 1.344 billion bushels. This is down 2.5% year over year, but down 29% over the prior five years.
Analysts are on a four-year streak of falling behind on the Dec. 1 soybean number, even though it was very high in the six years prior to that. Trade in three consecutive years of over-estimation of wheat stocks on Dec. 1 after being so low in the previous seven years.
The recent bias for corn on Dec. 1 was mixed and tilted due to over-estimation two years ago, when the USDA was making significant adjustments to corn inventories in the past quarters. A significant drawdown of March 1 inventories took place in June 2022, but the previous four quarters saw minor adjustments.
end of stock
Since U.S. corn production is seen largely unchanged, analysts should discount U.S. demand in 2022-23 based on an average increase of 57 million bushels in the final corn stock estimate. Expect 1.314 billion bushels 63 million smaller than in 2021-22.
U.S. corn ethanol production dropped dramatically amid a very cold winter storm in December, and U.S. corn export demand was very slow.
The projected 16 million bushels rise in US soybean ending inventories in 2022-23 to 236 million bushels is mostly in line with production estimates, indicating little or no expected changes to demand. That compares with 2021-22 final inventory of 274 million bushels.
winter wheat
Trade pegs Cultivation of winter wheat in the United States At a seven-year high of 34.485 million acres, reasonable prices considered when farming were at a 10-year high to this date. But the recent trade bias may point to a larger area.
Between 2000 and 2019, analysts guessed winter wheat seed only three times (2011, 2012, and 2018), but their estimates are now on three consecutive years of being very low.
South America
Argentina’s crops remain under traders’ lens as severe drought threatens yields for the second year in a row. Analysts see Argentina’s soybean crop at 46.7 million tons, down from $49.5 million in December.
This is exactly what happened last January, when the USDA cut its soybean harvest to 46.5 million tons from 49.5 million the previous month. This 6% decline in January 2022 was the closest and earliest change to Argentina’s grain that the USDA has made in over a decade.
Argentina’s corn harvest is expected to drop more than 5% to 52 million tons from 55 million in December. Last January, the USDA cut its corn harvest to 54 million tons from 54.5 million tons, compared to the final 51.5 million tons.
Karen Brown is a market analyst at Reuters. The opinions expressed above are her own.
(Reporting by Karen Brown; Editing by Matthew Lewis)
((karen.braun@thomsonreuters.com; Twitter: kannbwx))
The views and opinions expressed herein are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.