By Karen Braun
FORT COLLINS, Colo., Dec 9 (Reuters) – Thursday capped off the 15th and final trading day of 2021 featuring one of the U.S. Department of Agriculture (USDA) reports that have sparked extreme volatility for Chicago corn and soybeans over the last year or so.
While the impact was calm as expected this month, a potentially chaotic day looms just a few sessions into the New Year.
Most of the report surprises since last year have been rooted in the global drawdown of grain and oilseed supplies, partially driven by two straight years of short U.S. corn and soybean production. That, among other factors, has caused analysts to periodically misjudge U.S. and global inventories.
U.S. corn and soy supplies by next August are seen rising from the previous year’s levels but remaining below recent averages. That is supported by a record U.S. corn yield forecast, which makes the recent trend in CBOT corn futures unique.
Most-active corn Cv1 on Thursday settled up 0.8% at $5.91-3/4 per bushel, the contract’s highest finish on USDA report day since June 10. It is uncommon for corn futures to build in the second half of the year when U.S. harvest expectations rise from the first survey-based estimate in August.
The last few years have been mixed in terms of corn yield changes from November to January, but last year’s unusually large yield cut in January spurred the first of several limit moves in futures in 2021. An unprecedented miss in U.S. corn stocks also played a large role.
USDA’s January data dump is due Jan. 12 and will highlight U.S. corn and soy production, U.S. quarterly stocks and potential changes to the prior quarter’s stocks, U.S. winter wheat seedings, South American production and other global supply and demand.
BEST YEAR?
USDA reports are notorious for potentially quashing market narratives, and that often works against bulls. But corn optimists struggled less than usual this year when it comes to price freefalls.
CBOT corn’s worst report day of 2021 was Oct. 12, when most-active futures fell 2%, the ‘best’ worst outcome in more than 16 years. One of the biggest corn losses in recent years was 6% on Aug. 12, 2019, as analysts were blindsided by the U.S. crop outlook.
Corn futures gained 7.3% on June 30 when U.S. acres and stocks fell short of predictions. That was the biggest by percent since the same report in 2015, and that day featured the third limit-up corn move on report days in 2021, though there were a handful of other sessions where limit moves also occurred.
Although corn futures did not fall by large degrees on 2021 report days, the most-active contract settled lower on six of the 15 days versus four in 2020. Eight reports in 2019 were associated with corn price declines.
Government updates led to a drop in most-active soybeans Sv1 in four of the 15 instances, versus three in 2020 and six in 2019. Oct. 12 was also soybeans’ worst report day of the year with a 2.4% decline, and that immediately followed a 2.2% loss on Sept. 30. The extreme miss in U.S. ending stocks and healthy yield improvement in October were the culprits.
Those price declines were larger than anything observed following 2020 or 2019 reports, but the previous two years both featured larger setbacks, both in August.
Most-active soybeans ended Thursday at $12.64-1/2 per bushel, the highest settle following monthly USDA estimates since Sept. 10. The contract ended up the daily limit on March 31 with smaller-than-expected U.S. plantings.
CORN DEMAND
Strong global grain demand, despite the lighter supplies, has been a major factor in price strength over the last year. China continues to run the board as the top soybean and corn importer, but the country’s recent absence in the U.S. corn market has been disappointing.
The USDA report focus on Thursday may have caused some traders to overlook the data published earlier that day showing China bought its first full U.S. corn cargo for shipment in 2021-22 since May. Gross new sales totaled 68,507 tonnes in the week ended Dec. 2.
The net sales included 133,600 tonnes of corn switched to China from unknown destinations, something that had also happened two weeks earlier. That signals that China had previously bought a bit more U.S. corn than reflected in official records, and although these recent volumes are relatively small, it is a step in the right direction.
Another likely distraction from Chinese demand was Wednesday’s huge daily sale announcement of 1.84 million tonnes of U.S. corn to Mexico, the sixth-largest single day U.S. corn sale since records began in 1977 and the largest ever to Mexico.
The sale was a combination of bookings for both the current and next marketing year, and the demand is routine as large sales with similar timing can be found in most recent years.
Graphic- CBOT corn and soybean futures on 2021 USDA report dayshttps://tmsnrt.rs/3dDsv2Q
(Editing by Kenneth Maxwell)
(([email protected]; Twitter: @kannbwx))
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