• HEADLINES: USDA surprises soybeans with cut in US yield, World wheat stocks decline on trade; Focus now on demand into 2022.

• The USDA November crop report was bullish with soy futures leaping to sharp gains while corn/wheat follow. The big surprise was a decline in the 2021 US soybean yield of 0.3 bushels/acre to 51.2 bushels/acre. The trade was expecting a gain in the US soybean yield to near or above 52 bushels/acre, which was not uncovered. The smaller yield will prevent 2021/22 US soybean end stocks from ballooning much higher until more is known about S American crop production and Chinese demand.

• Research maintains a bullish view in wheat, moderately bullish view in corn and neutral outlook in soybeans. Key support should hold at $5.40-5.50 basis spot corn and $11.75-12.00 soybeans. Wheat is scoring a trading low as Russian wheat exports seasonally slow. The report allows the market’s focus to return to demand. The supply side of the US market is largely known into 2022.

US End Stocks (million bu)

                      Oct        Nov

            2020        2021        2021

Corn            1,236        1,500        1,493

Soybeans        256        320        340

Wheat            845        580        583

• NASS estimated the 2021 US corn yield at a record 177 bushels/acre, an increase of 0.5 bushels/acre from October. The yield gains came from MN at +4.5 bushels/acre, SD at +3.0 bushels/acre  and KY at +2.2 bushels/acre. The IL corn yield fell -1.4 bushels/acre to 207 while IN was down 2.6 bushels/acre to 189 bushels/acre. NASS indicated that it harvested 94% of its yield plots.

• WASDE lowered 2021/22 US corn end stocks by 7 million to 1,493 million bu with the crop growing 43 million bu while ethanol demand was raised 50 million bu. The average farmgate price held steady at $5.45. We would note that WASDE is too low in its ethanol demand forecast by as much as 150 million bu which would push 2021/22 US corn end stocks to 1,343 million bu, some 100 million bu larger than last year. Amid smaller 2022 US seeding due to soaring fertiliser prices, corn has a longer-term bull story.

• US 2021 US soybean production was lowered 23 million bu to 4,425 million with a yield of 51.2 bushels/acre. The final 2021 US soybean yield could equal last year at 51.0 bushels/acre which would allow for another cut of 18 million bu.

• WASDE cut 2021/22 US soybean export demand by 40 million to 2,050 million bu. The cut was needed and most of the bears would argue that it is too small. However, even if the cut is another 60-80 million bu, crush rates will be elevated which keeps 2021/22 US soybean end stocks below 450 million bu. The worst-case bearish outlook was extracted today from soybeans with downside price support at $11.75-12.00. Soybeans will struggle on rallies above $12.75 keeping the market in a range trade into 2022.

Global End Stocks (million mt)

                    Oct        Nov

               2020/21    2021/22    2021/22

Corn            290.0        301.7        304.4

Soybeans        99.2        104.6        103.8

Wheat            288.4        277.2        275.8

• USDA wheat data leans bullish and the ongoing tightening of the exporter balance sheets which suggests that lasting highs will not be scored until mid, or even late winter. US wheat end stocks were raised 3 million to 583 million bu as reduced imports and higher projected seed use were more than offset by a 25 million bu cut to exports. We view the USDA’s trimming of exports as premature as Russian shipments continue to slow amid a soaring export tax there. The USDA’s EU export forecast of 37.2 million mt is also unsustainable in our opinion, and work maintains that some measure of world demand finds the US from February onward.

• More importantly, USDA raised 2021/22 global import demand by 3 million mt to a new record high 201.1 million mt. Higher global wheat demand lowered exporter stocks/use to 12.1%, vs. 12.6% in October. Additional tightening of the exporter balance sheet occurs in December if Aussie production gains fail to offset expected production losses in Canada. The US and global wheat markets must encourage acreage expansion and a lasting bearish trend requires confirmation of trend/above trend N Hemisphere yields next summer.

• Soybeans will remain the Chicago laggard, but supply concerns associated with the USDA’s November WASDE have come and gone. Recall seasonal price trends in all major global ag markets are positive into winter/early spring. It is noteworthy that Chinese corn futures have scored newer seasonal highs at $10.80/bu and that Brazilian corn prices have stabilised at $6.50. All eyes now turn to S American weather and US demand. US ethanol and crush rates will be record large further boosting USDA forecasts. Wheat is the bull leader followed by corn, and soyoil.

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