The November USDA crop production report on Tuesday delivered bearish news to the crop markets as it forecast larger-than-expected 2015 U.S. corn and soybean harvests with corn now at 13.65 billion bushels and soybeans at 3.98 billion.
It also cut 50 million bushels from wheat exports, putting the current crop's total exports at 800 million bushels, the lowest since the 1971/72 crop year. That put ending stocks at 911 million, the highest since 2009/2010.
Increases in corn and soybean crop sizes had been expected from the October report but USDA's numbers topped the average trade forecast for corn and topped all estimates for soybeans.
"These are bearish reports all around, plain and simple. Some of the negativity is already baked into prices after this week's break below chart supports, so there is at least some hope the selling may burn itself out quickly," said Bryce Knorr, Farm Futures senior grain market analyst. "Longer term, however, demand remains an issue, especially for corn and wheat."
Corn, soybean and wheat futures in Chicago were lower ahead of USDA's numbers and added to losses after them. Near midday, corn was trading about 9 cents lower, soybeans 15 cents lower and winter wheat 11 to 15 cents lower.
"USDA's soybean crop estimate is huge. If it holds, demand must pick up, and with China still coping with myriad problems, that won't be easy," Knorr said. "USDA has a track record of underestimating demand, but its already boosted its forecast substantially."
USDA's corn production estimate topped Knorr's forecast, and "I was on the bearish side of trade guesses."
"On the demand side, the government cut its forecast of exports in line with my projections. But the cut in ethanol production is questionable, though USDA cut its forecast for sorghum exports, something I've been talking about for months," he said.
USDA reduced by 75 million bushels corn use for ethanol, as more sorghum is being used for the biofuel.
"Declining premiums for sorghum offered by exporters and large price discounts for sorghum relative to corn in interior cash markets drive expectations for higher use in ethanol production and higher feed and residual use," USDA said.
For 2015/2016 U.S. ending stocks, USDA raised corn to 1.76 billion from 1.56 billion; raised soybeans to 465 million from 425 million, and raised wheat to 911 million from 861 million.
"USDA's 50-million bushel cut in wheat export was right in line with my forecast. I expect this market to quickly forget about old crop and focus on 2016 production," said Knorr. "With Australia harvesting already and winter wheat in the northern hemisphere headed into dormancy, rallies won't get much traction for months."
Overseas, Brazil's 2015/2016 soybean crop, which will be harvested early in 2016, was left unchanged at 100 million metric tons; Argentina's 2015/2016 soybeans were unchanged at 57 million.
Australia's wheat crop, which was hurt by drought early and too much rain later, was lowered to 26 million metric tons from 27 million.
See results from the November, 2015, USDA crop production reports.
Graphics by Bryce Knorr