January WASDE Shakes Up Corn, Wheat Markets

Several major reports were released by the USDA on Friday, with the biggest being the January World Agricultural Supply and Demand Estimate (WASDE). The biggest shakeups took place in the corn and wheat markets, while soybeans had no major surprises. Corn acres were increased from 87.2 million acres to 87.7 million acres, much higher than expected. Analysts were also expecting yields to be increased slightly, but yields were actually revised down from 160.4 to 158.8. The yield reduction resulted in a smaller than expected corn production estimate, although 2013 will still stand as the largest corn crop on record. An increase in demand combined with lower production has resulted in much lower than expected ending stocks for the 2013-14 corn crop. Overall, January’s report is considered bullish for the corn market.

The month long slide in wheat prices was only magnified by bearish numbers in January’s report. We are late enough into the crop year that wheat production is known with relative certainty; however the January WASDE report had some significant changes in wheat demand. Perhaps the biggest shakeup was a 60 million bushel reduction in wheat use for feed, although the reduction is not unsurprising given lower corn prices. Part of the decrease in feed use was offset by an increase in exports, but ending stocks were still revised upward by 32 million bushels. A separate report gave us the first official estimate of wheat acres planted this fall. While many were expecting an increase in wheat acres going into next year, the USDA estimates that there will actually be a 3% decrease in winter wheat acres. Mississippi will see wheat acres cut in half, from 400 million acres last summer to 200 million acres this summer.

There were no big surprises in the reports on the soybean crop. Soybean acres harvested and yields were both revised up slightly, but those numbers were very close to what many trade analysts were expecting. The increased production was offset by an increase in soybean crush and exports, leaving soybean ending stocks unchanged. With few surprises, the reports would be considered neutral for the soybean market.

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