The Jan. 10 crop report from the U.S. Department of Agriculture ended with numbers that were bullish for corn, neutral for soybeans and bearish on wheat stocks.
Darrin Newsom, DTN senior analyst, looked at the report numbers during a webinar that morning and reasoned that the corn outlook was bullish because of smaller global and domestic ending stocks, increased demand for U.S. corn and smaller-than-expected quarterly stocks numbers.
He called the report on soybeans neutral because of unchanged domestic ending stocks, larger global ending stocks and increased global production.
The outlook for wheat was bearish, he said, because of smaller global ending stocks, quarterly stocks being higher-than-expected and smaller-than-expected winter wheat acreage.
For U.S. corn supply, carry-in was at 821 million bushels, down from 989 mb in the December report.
Production was down at 13.9 billion bushels, with total supply coming in at 14.78 bb.
Feed use was up significantly from the December numbers, with other demand increases in ethanol production and exports.
Corn crush carry-outs were down slightly from their predicted numbers. The USDA reports the average corn price for 2013 at $4.40 per bushel.
"For weeks now the corn market for 2014 has been moving on the idea that we were going to see larger numbers," Newsom said. "It's been grinding to new lows, which could be attributed to the fact that USDA lowered its (national average) yield from 160.4 in December to 158.8.
"Maybe this is more realistic. I don't know if this is set in stone, but it's what the markets are reacting to, and it's what we have to work with."
Supply and demand estimates for U.S soybeans earmarked production at 3.8 bb, up somewhat from pre-report estimates, with total supplies coming in at 3.45 bb, up slightly from pre-report figures.
Soybean crush showed an increase, as did exports, total use and carry-out. Soybeans prices are also down sharply from $14.40 in December to $12.50 on Jan. 10.
"I will always question what type of accounting is going on in the soybean market," Newsom said, "but this is what we're stuck with.
"We increased our production-we bumped up our average yield to 43.3 from the December yield of 42 bpa, so if the markets are truly believing this, this would be bullish for corn and bearish for soybeans, but what we're seeing this morning is that corn is rallying.
"It seems like traders are buying into the corn numbers," Newsom said.
Newsom said with corn production it's hard to get overly bullish with numbers that are so significantly higher than numbers seen in recent production years.
"Corn yield recovered in 2013," Newsom said. "It does open the door so when we get into late winter or early spring - and if we start talking planted acres and prospective planting and what trend line yields going to be - if we get to 163 to 166 bpa, all of a sudden it could change the dynamics of the market again.
"I don't see the March report changing the supply and demand all that much. I think the market will sit back and say it's seen what the yield is and it won't worry about 2014 right now, because they have an opportunity to move higher."
Soybeans are similar, he said, noting that bushels were short of expectations, but are still a solid number.
"If we continue to see smaller numbers of cattle on feed, it makes me question the ability for us to gain a billion bushels of feed demand over last year," Newsom said. "I think we have to wonder where the billion bushels of feed demand is coming from."