USDA production report shakes grain markets | AG

USDA’s annual production report, released Jan. 12, included surprises that will likely have implications for grain markets going forward.

“While it was no surprise that USDA had surprises for us, it shocked the system with its reduction in last summer’s row-crop production estimates,” said Jacob Christy from The Andersons.

The biggest shock may have been a reduction in harvested corn acres.

“USDA lowered harvested acreage by an unprecedented 1.6 million acres,” Christy said. “This was the largest cut in harvested acreage in a January report going back to 1974. By far, that caught the market most off guard.”

Soybean crops were also lowered, and stocks were well below 2022 estimates in all corn, soybeans and wheat, noted Steve Freed of ADM Investor Services.

“I think prices over-did USDA numbers,” Freed said. “Carryouts really haven’t changed that much. Crops were down, but demand was also down. I think we had an over-reaction in the marketplace.”

Brian Splitt of AgMarket.net said the report may increase grain exports.

“Everybody expected this report to be bearish and now the carryout is less than what we thought it was going to be,” he said. “Does that start to spur some of the world buyers to buy? And if it doesn’t, that’s a problem. This report should start to bring in some export business.”

Declines in harvested corn acreage were pronounced in Kansas, Nebraska and South Dakota, with South Dakota alone down 240,000 acres. Much of that was likely from failed acres due to drought, said Joe Vaclavik of Standard Grain.

Vaclavik added much now hinges on the Brazilian crop.

Jody Lawrence of Strategic Trading Advisors agreed that global issues will still play a big role in grain markets.

“The variable of the report is out of the way, but the variables of Russia and Argentina remain in place,” he said. “All rallies driven by bullish developments from either will be sold as new old and new crop profit are available in the increasingly uncertain production and demand year ahead.”