USDA Reports Review           01/12 14:56

   Shocking New Records in Yield and Production Pummel Corn Futures

   With nearly every analyst and pundit expecting corn yield and production to 
both take a hit due to southern rust disease and a dry finish to the crop in 
2025, USDA shocked them all in Monday's January USDA Crop Production and 
December Grain Stocks reports, with not only a record yield and production but 
also a record supply of corn on hand in December. While corn and soybeans had 
their individual reasons for weakness, they plunged on the coattails of the 
demoralized corn market.

Dana Mantini
Senior Market Analyst

   Nearly every analyst and pundit expected corn yield and production to drop 
in Monday's USDA report. USDA shocked them all.

   CORN

   With nearly every analyst and crop scout in the U.S. predicting a January 
decline in both corn yield and production, they got just the opposite. To add 
insult to injury, both the harvested acres rose sharply, and Dec. 1 corn stocks 
set a new record on the upside.

   The Dow Jones survey before the report was looking for a 2.1-bushel-per-acre 
(bpa) decline in yield to 183.9 bpa and a drop in production of 228 million 
bushels (mb) to 16.544 billion bushels (bb). Those numbers instead were a 
record-large 186.5 bpa -- up a half-bushel per acre from December -- and an 
increase of 300 mb to a record-large 17.02 bb production in 2025. As if that 
wasn't enough to make bulls run for the door, the Dec. 1 corn stocks came in at 
a record 13.3 bb and some 260 mb higher than expectations. Oh, and one more 
thing: Harvested acres rose by a whopping 1.3 million from December as acres 
for silage were reduced. The only demand change was an increase in feed and 
residual of 100 mb and a decrease of 10 mb in food, seed and industrial of 10 
mb, leading to a net 90 mb gain. That sent ending U.S. corn stocks to a 
burdensome 2.227 bb -- up nearly 200 mb from December and 245 mb higher than 
the average Dow Jones trade estimate.

   On another bearish note, U.S. sorghum production rose 27% from a year ago at 
437 mb with harvested acres up 7% and yield rising 11.3 bpa above last year. 
Sorghum prices have been dirt cheap, with little interest from China, and have 
given corn plenty of competition in the Western and Southern Plains feed and 
ethanol arenas.

   On the world front, there were just a few notable changes, with USDA failing 
to increase Argentine corn production from 53 million metric tons (mmt) (2.08 
bb) despite most analysts and scouts expecting Argentina to rise to a record of 
over 58 mmt (2.28 bb). On a side note, even though China has been a no-show for 
U.S. corn demand lately, the WASDE report raised that corn crop by 6.25 mmt 
(246 mb) to 301.25 mmt (11.86 bb). World ending stocks of corn at 290.9 mmt 
(11.45 bb) were well over the December stocks of 279.2 mmt and the average 
trade estimate of 280 mmt.

   It seems bullish corn traders didn't have a chance, with spot March down 
more than 25 cents at midday and finishing down 24 1/4 cents at $4.21 1/2.

   SOYBEANS

   There was a lot less shock and awe in the soybean data from the January 
report, but what was changed was not bullish. Soybean yield, expected to drop 
by 0.3 bpa due to late-season dryness, instead remained unchanged at a record 
53 bpa. With a modest bump in harvested acres, soybean production rose 9 mb 
from December to 4.26 bb. However, the slow pace of soybean sales until just 
recently had USDA forced to lower exports by 60 mb to 1.575 bb. And that number 
has the potential to go even lower, as Brazil is in the middle of a 
record-large harvest with prices sharply discounted to those from the U.S. On a 
positive note, U.S. soybean crush was raised by 15 mb to a record-large 2.570 
bb. The net effect was that ending soybean stocks in the U.S., rather than 
falling a bit, rose by a net 60 mb to 350 mb. Traders had been looking for a 
decrease of just 11 mb to 290 mb. .

   On the world side, there were few changes, but Brazil production, as 
expected, was increased by 3 mmt to a record 178 mmt (6.54 bb). This may still 
end up being light, with several analysts and grain firms looking for a crop 
that could be even 2 mmt to 6 mmt (220 mb) higher than that. World ending 
stocks of soybeans rose to 134.41 mmt (4.94 bb) compared to December's 122.4 
mmt (4.5 bb).

   March soybeans at midday were down over 12 cents per bushel, finishing down 
13 1/2 cents at $10.49.

   WHEAT

   Wheat was expected to be only modestly affected by the January report with 
regard to the balance sheet, and that turned out to be the case. However, what 
changes were made were mildly bearish on the domestic side. While old-crop 
wheat carry-in was increased by 4 mb to 855 mb, feed and residual was reduced 
by 20 mb, with the net effect being wheat ending stocks rising by 25 mb to 926 
mb. Traders were looking for ending stocks to be lower at 897 mb (average 
guess), but the number was 28 mb above that. That, along with world changes and 
wheat seeding data, sent wheat to moderate losses on Monday.

   On the world side, and pretty much as expected, the nearly constant increase 
in major exporter production and supply did not stop on Monday. Argentina's 
wheat crop was raised 3.5 mmt to 27.5 mmt (1.01 bb), and Russia's production 
rose by another 2 mmt to 89.5 mmt (3.29 bb). Global ending stocks rose from 
274.9 mmt to 278.25 mmt (10.2 bb). While these numbers were mostly expected, 
all eyes were on the wheat seeding report. That too, was more bearish than 
traders had expected at 32.99 million acres. The average trade estimate 
pre-report was 32.3 ma. In effect, the number was only 200,000 acres less than 
the last USDA estimate of 33.2 ma.

   Wheat markets had a wide range and finished lower with Chicago March down 6 
cents and Kansas City off 3 1/2 cents at $5.26 3/4, but well below the morning 
highs.

   FINAL THOUGHTS

   The January 2026 USDA Crop Production, quarterly Grain Stocks and Wheat 
Seedings reports provided a major shock, especially to corn traders, with a 
record-breaking yield and production and record December stocks, leading to 
sharp losses by the close. Soybeans were modestly bearish, but with room to 
move the Brazil production number higher and U.S. exports lower, the advantage 
may go to the bears. In wheat, the ongoing and relentless story of growing 
world supply and competition did not end on Monday. However, even in light of 
that, U.S. wheat exports continue to overperform -- just about the only good 
news in a sea of bad.

   Dana Mantini can be reached at dana.mantini@dtn.com

   Follow Dana Mantini on Twitter @Mantini_r




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