9 November 2016 | International Agri Trading Ltd

The USDA’s November WASDE is viewed as moderately bearish. Soybean yield was raised, which was expected, but by a bit more than thought, and surprisingly US corn yield was hiked to a new record 175.3. US corn ending stocks were lifted 83 Mil Bu to 2,403 Mil, soybean stocks were raised 85 Mil to 480 Mil, while wheat stocks were raised marginally to account for lower projected food consumption.

Corn yields were raised across much of the Central US, with major upward adjustment noted in ND and MN, harvest results there did improved as the season progressed, and NASS’s ten state ear weight was pegged at 0.36lbs/ear, vs. 0.355lbs in October. It is a surprise, but NASS’s yields in November are typically very close to final, therefore these numbers will be used moving forward. Soybean yield at 52.5 is a new record and some 14% above the 30-year trend, and this deviation from trend is something that has not been seen since 1994. Substantial increases, compared to October, are noted in MI, WI, MN and KS. The USDA raised ethanol demand draw 25 million to a record 5,300 million bu. Other industrial corn use was boosted 60 million bu, but amid production of 15.3 billion, and total supplies of just over 17 billion (vs. 15.4 billion in 2015/16), a stock building year lies ahead. US corn production is forecast to exceed total consumption by a sizeable 600 million bu. Soybean exports were raised 25 million bu to 2,050 million, but crush was lowered 20 million bu amid a decline in projected meal exports. Total US soybean consumption was raised only 7 million bu, allowing end stocks to jump considerably.

November ’16 WASDE World End Stocks:
		Oct	Nov
	2015	2016	2016
Corn	209.4	216.8	218.2
Soybeans	77.1	77.4	81.5
Wheat	241.0	248.4	249.2
Total	527.5	542.6	548.9

Global corn and soybean stocks were lifted slightly, mostly to account for higher US ending stocks. S American corn and soybean production was left unchanged, and major exporters’ corn stocks were also left alone. Slightly higher production is offset by rising global trade. Global numbers are far less exciting than US balance sheet changes.

Corn, soybeans and wheat are down 5-20 cents at midday, with soybean leading the way, which is probably a fair and reasonable reaction. Indeed, yields were surprisingly high, and the need for the markets to find demand will remain intact. However, on breaks the markets will continue to find this needed demand. Following today’s price action, Gulf corn will be offered even further below other origins and at parity with Black Sea feed wheat. US Gulf HRW’s discount to Russian origin will be rising, and reliable S American soybean exports are still some months away. For some while research has indicated corn will trade at $3.35-3.60, basis spot futures, into late 2016. Soybeans are valued fairly between $9.75-10.20, basis January ’17 futures, with wheat’s range pegged at $4.05-4.30. NASS’s November crop report did little to change this, and we maintain that the next major driver of price will be S American weather in late December and early January. It is a bearish report, but Chicago futures are already viewed as cheap relative to biofuel margins and global prices. Neutral, choppy trade is still projected through the end of 2016.

Away from the report we should note that Egypt purchased a further 240,000 mt of wheat for mid December shipment in its latest tender. Russia picked up 180,000 mt with Romania the balance of 60,000 mt at an average price reported to be $199.31/mt basis C&F. Interestingly, the price paid is close to $6.00/mt above the last tender and some $26 above purchases made last summer!