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WASDE fails to surprise

It all adds up to too much. Canola, wheat, corn, soybeans — there is even more of most commodities than expected by the U.S. Department of Agriculture in its monthly reporting.

However, most of the grain trade appears to have anticipated the Jan. 12 markets news and built oversupply assumptions into already struggling prices.

The U.S. corn crop was big in 2017-18, but the carryout was bigger than expected by the USDA. And corn wasn’t alone. Soybean surpluses grew, as did wheat. But when the end of trading came Jan. 12, for the most part prices were little changed from the open.

“USDA tends to underestimate demand and we get tighter stocks almost every year with this January report” said Arlan Suderman, chief commodities economist for American financial services company INTL FC Stone in a presentation Jan. 12.

Average American corn yield rose slightly from the December projection, from 175.4 bushels per acre to 176.6, raising the production in the U.S. by 26 million bu. This, combined with slightly lower-than-projected feed use, down 1.84 million tonnes, pushed the forecasted ending stocks down by about 2.5 million tonnes.

Suderman said there were few surprises for corn.

Soybeans also saw small changes in supply and demand, as global supplies rose while American production fell, based on earlier production estimates. The shift yielded a global carryout of 98.6 million tonnes. The market took it in stride and rose slightly by the end of the trading day, carrying corn up with it.

Average market prices are projected to be off US17 cents for the 2017-18 crop from a year earlier, remaining in a range US$8.80 to US$9.80.

Globally, wheat’s ending stocks rose 15.3 million tonnes, reaching just over 268 million tonnes. The slightly higher production combined with reductions in miller demand added to an already difficult to manage surplus.

The WASDE’s new estimated ending stocks were higher than the average trade estimate and came in three million bu. higher than the highest industry estimate.

Adding to the problem was a four million bushel reduction in wheat seed use last fall, as U.S. growers turned their backs on the crop.

Hard red spring wheat exports from the U.S. fell, pressuring that crop during trading after the monthly report’s release.

Despite all that negative news, the price of the crop is projected by USDA to increase by about 30 percent over 2016-17 numbers, once the dust has settled from the 2017-18 marketing.

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