- It feels perfectly valid to suggest the report held a couple of surprises but no significant change to either US or global balance sheets. The theme remains the same, oversupply and large stocks, and potentially more so in the absence of adverse S American weather. Our belief is that we are at or near the upper end of a post-harvest price rally.
- 2014 US corn yield was trimmed slightly to 173.4 bu/acre, 0.8 below the October estimate whilst soybean yield was increased to a record 47.5 bu/acre. In summary, corn yield was deemed slightly supportive whereas soybean yield was seen as slightly bearish. For the record, US wheat output was trimmed 9 million bu on resurveyed data.
- US 2014 corn production was lowered 68 Mil to a still record large 14,407 million bu and US 2014/15 corn stocks were lowered by 73 Mil to 2,008 Mil to account for slightly higher domestic use. This validates a December contract seasonal high of $3.60-3.80 but does not change the structure of an adequately supplied market!
- Global corn, soybean and corn end stocks remain large by any nearby comparison. 2014/15 world wheat stocks are up by 7.2 million mt from last year’s 192.9 million mt, corn is up 25.7 million mt at 191.5 million mt with 2014/15 soybean stocks up a huge 23.5 million mt at 90.3 million mt.
- Clearly the word “shortage” appears largely irrelevant in relation to US or world corn, wheat and soybeans and despite short term US soybean pipeline filling lasting price rallies seem doomed to failure and short lived. Prospects for a lasting bull run based upon reduced crush rates or nearby tightness can not last when the US is facing its largest soybean end stocks in around six years. S American weather, should it turn adverse, is the one potential threat and at this time this looks unlikely with continued suggestion that (mild) El Niño conditions are set to continue at least until the end of the year favouring S American crop prospects. Fund appetite for reduced longs/increased longs looks vulnerable to liquidation if our outlook proves correct.
- It should be borne in mind that NASS will not update figures for corn and soybeans in December, the next major report is scheduled for release on January 12 when final corn and soybean production will be published along with December 1 stocks. There is a very strong likelihood that December stocks for corn, wheat and soybeans will be well above last year and justify our bearish stance.
- Our recap of the November ’14 USDA Report can be downloaded by clicking on the link below: