CBOT weekly outlook: Bullish USDA report sends soy, corn up sharply

MarketsFarm — Soybean and corn yields in the United States ended up much smaller than early expectations, according to updated supply and demand estimates released Tuesday by the U.S. Department of Agriculture.

The resulting drop in production and ending stocks has sent futures rallying to new contract highs, with more gains likely.

Average U.S. soybean yields for 2020-21 were lowered to 50.7 bushels per acre, from 51.9 bu./ac. in October. Trade expectations had been for a much more modest downward revision, and the resulting drop in projected ending stocks to 190 million bushels was bullish for the market.

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The 100 million-bushel cut from the October carryout forecast was made without any adjustments to exports, which means actual ending stocks could end up tighter still, said analyst Terry Reilly of Futures International in Chicago.

“The USDA taking (soybean) ending stocks to 190 (million bushels) without touching exports was quite a surprise,” Reilly said, adding that “we think stocks could get more snug going forward.”

USDA also lowered its corn yield and ending stocks projections, pegging the 2020-21 carryout at 1.702 billion bushels. That compares with the October estimate of 2.167 billion bushels.

The revised corn balance sheet did include an increase in projected exports, but Reilly said actual corn movement could end up even larger over the course of the marketing year.

“If China continues to buy as much corn as they can, the U.S. will benefit until South America comes online,” said Reilly.

With both CBOT corn and soybeans touching fresh contract highs in the immediate aftermath of the USDA report, Reilly said March corn was now looking at an upside target of US$4.40-$4.50 per bushel.

“January soybeans could easily reach US$11.80-$12 (per bushel),” he added.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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