Morning Comments January 12, 2022



Corn-harvested acres are up 300k, yield is unchanged. Ethanol use is up 75 mbu, exports are down 75 mbu. Ending stocks are up 47 mbu on the larger acreage harvested mostly. Corn dipped initially but is now recovering back to unchanged. There is nothing drastically different from the U.S. balance sheet. There are some shifts around the world but ending stocks are still 303 MMT, slightly below the average trade guess. We are back to watching the weather for Safrhina. It is surprising we didn’t see a bigger move, but the day is young.

Beans-harvested acreage is down 200k, yield is up to 51.4, which is an increase of 0.2. There are no changes on the demand side of beans, even though some thought we could see a reduction because of the earlier BRZ crop. World stocks are about 4 MMT below estimates and 7 MMT lower than the December report. This is a result of a 5 MMT reduction to BRZ to 139, and 3 MMT reduction in Argie crop. These are above some private estimates but below some other industry participants. Export prices and harvest progress will dominate beans for the next month. Beans dropped initially, but now up 4. There is no real change in the narrative- Chinese demand vs South American supply and weather.

Wheat has bigger ending stocks on lower exports(not surprising) and less feed use. Wheat is down 8 at the moment. World ending stocks are above the guess by 1 MMT. Wheat will still be a follower going forward unless the RUS/UKR situation escalates. 

Cotton is higher after the USDA cut yield to 849 lbs vs 885 in December. Even with harvested acreage up 50k, the loss of production is 600k bales. Exports were cut by 500k, but ending stocks were still down 200k bales. Cotton remains a fundamentally somewhat friendly market with world stocks working lower, now at 85 mln bales, well off the levels of a few years ago.

Corn and bean stocks were not a game changer in today's report either. So, we will go back to watching South American weather, inflation trade, outside markets, and potential Chinese demand. Typically, this report makes a difference, but today most are left wanting more of a move.

Corn and beans both made the round trip yesterday, trading both higher and lower before settling relatively unchanged as all eyes turn to today's USDA numbers set to be released at noon Eastern.

Brazil's version of the USDA released their estimate of Brazilian production early yesterday morning, surprising some by coming in higher than expected for soybean production, while coming in below expectations on corn production.

Ahead of yesterday's CONAB report most traders were expecting a pretty significant soybean production cut, with many expecting the group to take over 7 mmt off their December estimate, taking us down to 135 mmt on the year. CONAB was hesitant to make such a reduction, only taking 2.3 mmt off their estimate, down to 140.5. Cuts to Parana production were the culprit as many believe there is still time for Rio Grande do Sul and Santa Catarina production to be saved by a shift in weather. Production estimates for the central and northern areas of the country were left unchanged from last month.

The biggest surprise in yesterday's numbers was a cut to the corn production outlook. Ahead of the report traders were expecting just a bit in the way of a haircut, as the bulk of corn production happens February forward in the country. However, with the majority of first crop corn production taking place in the far southern regions and the hot and dry conditions we've seen these last 6 weeks, a big cut is somewhat understandable.

Overall corn production out of Brazil is expected to come in at 112.3 mmt. While this would be up significantly from last year's 87 mmt crop, the cut keeps the world market on its toes as the USDA is quite a bit higher on their projection in the year ahead. 

Of course, with over 70% of Brazilian corn production coming from the Safrinha crop, that is only starting to be planted, there is a lot of time for adjustments in expectations and weather premiums to be added and subtracted. 

With the bulk of Argentina's production season really getting rolling, we are likely going to remain glued to weather models and forecast outlooks for the next several weeks.

Outside of South American production outlooks traders will be watching today's USDA numbers very closely. Last year's corn figures were a catalyst to a significant move higher as the USDA surprised us with one of the largest quarterly stock misses versus trader estimates we have seen.

With so many bullish surprises from the USDA for the last year and a half or so, it is easy to see why many traders are coming into today's figures with the idea the pattern continues. Many commercials continue to pressure spreads in the idea that corn production has been overstated, while others believe demand is understated.

In any event today is going to give us final production figures for 2021, and quarterly stocks figures from December 1st. Quarterly stocks in corn give us insight in feeding rates as well, providing a look into indicated disappearance for the quarter. In the end the USDA will take all of these components of information and work to further refine their supply and demand outlook for the year ahead.

Going into today, traders are expecting domestic corn carryout/ending stocks to come in around 1.472 bbu; this would be down slightly from last month's 1.493 bbu, with a range of estimates coming in from 1.386 to 1.550.

Soybean carryout/ending stocks are expected to come in at 348 mbu, up only slightly from last month, with a range in estimates of 305-411 mbu. Wheat carryout/ending stocks expected to come in around 608 mbu, up 10 mbu from last month.

Global carryover is expected to be lower for corn and beans, with wheat carryover expected to stay relatively close to unchanged. 

Overall, going into today, keep a level head and be honest with yourself about what your risk truly is and what we're working to protect.

Corn down 1 to 2

Beans down 5 to 6