Safe to say the Bears took the field early on Thursday morning with the release of the WASDE report at 11 AM Central. While most of the figures within the report were within their estimated ranges, there were still a number of bearish surprises. Specifically, the increase in Brazil’s planted acres, and USDA’s larger-than-anticipated 170 million bushel increase to domestic corn production. Prices adjusted sharply lower following the report, but managed to close off of their intraday lows. Despite the bearish report, we’ve seen a marked improvement in export performance, with China purchasing as much as 1.588 MMT (58,348,995 bushels) of soybeans just this week. In order to carry the grains off of the mat, we will need to see a continuation in the recent demand
December corn justifiably made new lows after the WASDE report was released. In the report, USDA increased corn production 170 million bushels to 15.234 billion bushels as a result of average yields increasing 1.9 bushels/acre to 174.9 BPA. On the demand side, domestic exports were left unchanged, but FSI and corn usage for ethanol were both notched higher. In aggregate, U.S. corn demand increased by 125 million bushels, and ending stocks were just 45 million bushels higher than last month at 2.156 billion bushels – above the average trade estimate of 2.144 billion bushels. Suffice to say, the figures from the report were the catalyst behind the December contract making news on Thursday, and again on Friday. December corn closed lower for the third consecutive week, seeing losses of 13 ¼ to settle at 464. With the 464 settlement, December corn successfully defended our 2-star support pocket between 460 and 464 ½, but bulls will have their work cut out for them next week as a break through 460 opens the door to the high 430’s and 440’s.
After testing our 4-star resistance pocket between 1383 and 1390 early in the week, the WASDE report quickly sent January soybeans lower. Perhaps the largest surprise in the soybean figures was the modest increase in national average yields, coming in at 49.9 BPA compared to 49.6 BPA last month. The net-effect was an increase in domestic soybean production by 25 million bushels to 4.129 billion bushels. Meanwhile, the demand side of the equation was left completely unchanged. Much of the rally this week was due to skepticism surrounding Brazilian crop conditions, so it was viewed as a disappointment when USDA left South American soybean production estimates unchanged. Realistically, it’s still too early for USDA to make any sweeping changes this far ahead of harvest. As a result of Thursday’s sharp sell-off, January soybeans settled the week with modest losses of 4 ¼ cents, settling at 1347 ½. While we’re still about 5 cents off of our 4 star support pocket between 1332 and 1342, bulls will have to defend this pocket to avoid retesting the psychologically significant 1300 level.
Even though the WASDE report was mostly a non-event for the wheat contracts, December wheat followed corn and soybeans lower on Thursday, and wiped away the majority of gains from earlier in the week. The most significant takeaway for the wheat complex from the WASDE report was USDA lowering Argentine production by 1.5 MMT to 15.0 MMT, while leaving the door open for further downward adjustments in subsequent reports. For now, trendline support is holding up relatively well. We were unable to sustain consecutive closes above our 3-star resistance pocket between 582 and 585, but bulls will certainly continue to push prices back toward 600 in next week’s trade.