CORN---------

Corn closed the week ¾ of a cent higher. Private exporters announced sale of 207,000 metric tons (mts) of corn to an unknown destination for 2020-21. 

In the weekly export inspections report, U.S. corn exports last week of 21.7 million bushels (mb) were a three-week high. Cumulative exports of 339 mb are down 53% from last year's 727 million at this time, with corn shipments needing to average roughly 40.2 mb per week in order to reach the USDA's 1.85 billion bushel (bb) export projection versus 33.2 mb per week from this point forward last year. 

The USDA increased corn yields and production while the trade was looking for a small reduction of both. The yields were increased to 168 bushels per acre (bpa), up 1.1 bpa from prior estimates. Harvested acreage reductions were noted and final production figures are estimated at 13.692 bb. The USDA did indicate they would resurvey farmers that still have an unharvested crop, but those changes will have minimal on the balance sheets. 

The USDA increased feed usage by 250 mb, production by 31 mb and beginning stocks by 107 mb while lowering exports by 75 mb. This resulted in ending stocks being reduced by a modest 18 mb. This leaves U.S. ending stocks at 1.892 bb with a stocks to usage ratio of 13.4%. 

This report has to be a disappointment to bulls and bullish farmers that were hoping the USDA would finally lower yield forecasts. USDA reported Dec. 1 U.S. corn stocks at 11.389 bb, essentially 270 mb less than anticipated by the trade.

Strategy and outlook: Overall fundamentals remain bearish and now with the large spec funds holding a net long position, the upside potential appears to be limited unless a weather issue develops in South America.

 

SOYBEANS---------

Soybeans closed the week 4 ½ cents higher. Private exporters did not announce any private sales. 

In the weekly export inspections report, U.S. soybean export inspections were a 12-week low of 35.4 mb. Cumulative export inspections of 799 mb are up 25.6% from last year's 636 million, with shipments needing to average roughly 27 mb per week in order to reach the USDA's 1.775 bb export projection versus last year's 30.6 mb per week from this point forward. 

The USDA made even less changes to the soybean market than to the corn balance sheets. Beginning stocks were lowered by a mere 4 mb and yields increased by ½ bushel per acre with harvested acres down 600,000. This resulted in a slight 8 mb increase in production to 4.482 bb and usage was left unchanged at 4.008 bb with ending stocks unchanged at 475 mb. 

The 475 mb is the second largest on record, only trailing last year and the stocks to usage ration is a comfortable 11.8%. Dec. 1 U.S. soybean stocks also were larger than expected at 3.251 bb, coming in 65 mb larger than expectations. U.S. soybean stocks are the second-highest on record, with the stocks to Sept-Nov usage ratio the second highest of the last 11 years. 

Production in Argentina and Brazil were left unchanged at 53 million mts (mmts) and 123 mmts respectively. This would be a new record production if realized. 

Strategy and outlook: Futures probed weekly resistance and could test them again if China is a large buyer during the signing ceremony. South America looks to produce a record soybean crop if the weather is normal during the next 2-3 weeks. This will surely cut into U.S. exports and limit the upside potential. 

 

WHEAT--------

For the week, Chicago wheat closed 8 ¾ cents higher, Kansas City wheat closed 18 ¾ cents higher and Minneapolis wheat 10 ¾ cents higher. Egypt bought 300,000 mts of Russian, Romanian and Ukrainian wheat. 

In the weekly export inspections report, U.S. wheat exports for the week were just 12.7 mb. Cumulative exports of 546 mb are still up 15% from last year's 476 million, with shipments needing to average roughly 18.2 mb per week versus last year's 20.7 mb per week from this point forward in order to reach the USDA's 975 million bushel export projection. 

The USDA reported Dec.  1 U.S. wheat stocks at 1.834 bb, 83 mb below the average trade estimate, the largest “bullish surprise” on record for this report. This is down from last year’s 2.01 bb and the lowest in four years. 

For U.S. balance sheets, feed and residual increased 10 mb while seed usage was reduced by 1 mb, resulting in a 9 mb reduction to ending stocks at 965 mb. This is the tightest ending stocks since 2014-15, however, it is still a stocks to usage ratio of a robust 45.1%.  

The USDA estimated 2020-21 U.S. winter wheat planted area at 30.804 million acres, down from last year’s 31.159 million. On a by-class basis, HRW area of 21.8 million acres is down from 22.5 million last year and a bit below average expectations of 22.1 million. Meanwhile, SRW area was estimated at 5.640 million acres, up modestly from last year’s 5.201 million and solidly above average market expectations looking for a decline to 5.118 million. White wheat acres were estimated at 3.370 million versus 3.500 million last year and 3.490 million “expected.”

Strategy and outlook: Chicago and KC wheat both rallied into key weekly resistance at a time when the commercials have become aggressive sellers. This should put an end to the rally that prices have been seeing as the fundamentals do not support the current values. 

 

LIVE CATTLE---------

live cattle closed $2.62 higher while feeder cattle closed $4.85 higher. Fed cattle trade in the North was $124 live and $199 to $200 dressed, steady when compared with the week prior. Trade in the South was $124 last week, steady when compared to the prior week. 

In the first Fed Cattle Exchange (FCE) online auction, there were 525 head listed for sale from four lots, two in Kansas and two in Texas. One lot in Kansas sold at $124.25 while two lots in Texas and the other lot in Kansas were no sold at $123 and $124.25 per hundredweight, respectively. 

The second FCE online auction saw 470 head listed for sale with two lots from Texas and one lot from Kansas. One lot from Texas sold at $124 and the other lot was PO'd. The Kansas lot was PO'd at $124.25. The latest USDA steer carcass weights were one pound heavier at 905 pounds compared to the prior week of 904 pounds, making them nine pounds above last year. 

Last week's net beef sales of 3,700 metric tons (MT) reported for 2019 were down 42% from the previous week and 45% from the prior four-week average. 

The USDA released the latest protein trade date for Nov. and beef exports were a bit disappointing. Beef exports totaled 245 million pounds, down 8% compared to a year ago. Through November exports are 4.4% lower than 2018.

Strategy and outlook: The strong cash markets and export sales will be bullish for the market. Cash could weaken quickly if packers decide to cut back on weekly kills to reclaim lost margins. 

 

HOGS----------------

Lean hogs closed the week $1.22 lower. Last week's net pork sales of 3,300 MT reported for 2019 - a marketing-year low - were down 80% from the previous week and 87% from the prior four-week average. 

The latest Iowa/Minnesota weekly hog weights for Jan. 4 came in at 288.9 pounds versus 287.1 pounds last week and 286.6 pounds last year. U.S. pork exports totaled more than 259,000 tons in November, a monthly record. Pork shipments in Nov. jumped 11% from the previous record in July. Exports to China touched around 79,000 tons, topping a previous record set in July.  November pork exports totaled 623 million pounds, a 22% increase over last year. The U.S. exported 157 million pounds to China, which was a record large amount, and only the fourth time that monthly exports have exceeded 100 million pounds. 

Strategy and outlook: Futures should rally off technical support and expectations of large Chinese purchases of US pork products now that Phase 1 of the new trade agreement will become effective this month. 

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Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. The home office is in Springfield, Mo., with branch offices in Thief River Falls, Minn.; Verona, N.D.; Yankton, S.D.; Storm Lake, Iowa; and Springfield, Neb.