Wednesday's USDA crop report had little for the bulls and the bears, as the numbers were largely in line with pre-report trade estimates.


Corn production was put at 12.310 billion bushels, down 123 million from last month and 92 million under pre-report trade estimates. They came to this by cutting yields from 148.1 to 146.7. This was the fourth consecutive month with a lower production number. Since the July 12 crop report, USDA has cut production by a total of 1.160 billion bushels. Ending stock projections in July were 870 million bushels.

Hmmm. That means that if we took production cuts from ending stocks, we ran completely out of corn and ended up minus 290 million?! No, the government couldn't have that reality set in; it would have sent corn prices into hyper price-rationing and the price would have shot to $12 corn or higher. So, this began the shell game to cut every conceivable usage for corn to offset production declines, thereby keeping price rationing (and its inflationary destruction) from happening.

In the last three months, USDA has cut demand via export projections, feed use, ethanol.

Wednesday's report put ending stocks at 843 million bushels, only 23 million under last month - by cutting feed use again by 100 million bushels.

Note: there's no production report in December. The final number on production comes on the January report. It will be interesting to see where the government cuts usage - from where - and by how much, as production cuts on the final report could be measurable on two fronts. One, the four states with the lowest quality ratings, therefore the lowest yields will harvest half their crop in November and it's those production declines that show up in January. Two, the hidden, but watched, harvested acres number could see a 1- or 2-million acre drop.

The October and this month's report left acres planted at 91.9 million acres and harvested 83.9. We have not seen the acres lost in this past spring planting season show up yet. The record rains this spring led to pooling and ponding of lowlands and banks bursting on the Ohio, Illinois and Mississippi rivers flooding planted and unplanted land.

The January report is set up for a potentially very bullish surprise. Bean production was put at 3.046 billion bushels, down 14 million from last month and 13 million below pre-report estimates. But cuts in exports of 50 million bushels helped raise ending stocks 35 million to 195 million.

 Same as corn, every month sees lower production offset by lower usage.


 Wheat went unnoticed on ending stocks with a big 828 million bushels, down nine million from last month, but nine million over estimates. Traders came in Thursday and said, What report?!  and began to remove the price premium built in.

With crops basically having demand now as the driving force, daily trade fundamentals revert back to where's the U.S. dollar and its psychological impact on export demand and crude oil and its relationship to corn-based ethanol.

Our Thursday Weekly Export Sales report showed 251 million metric tons of corn was sold last week, down 60% from the week prior. China was in for 119 of the total but that was still too small to bring buying to futures.

It's clear China won't buy large tonnage around the $6.60 area, so we may need to push back to the $6.30 area where we were  three weeks ago - China was in for 900 million that week.

Beans continue strong at 604 million versus 209 the week prior with China in for 334 of the total. Sales are good; we're the only port in the world with freshly harvested beans, but China isn't buying as much as a year ago. Last year's  weekly number was 1.007 million metric tons. As long as South America continues to get good rainfall on their recently-planted crops (which come to market next February), China will be patient and not overbook U.S. beans. If South America's weather turns too dry, demand will shift to US ports quickly.


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