By Karen Braun
NAPERVILLE, Ill. (Reuters) -If anything can derail a price rally, it is a curveball from the U.S. Department of Agriculture.
Chicago corn futures were slightly lower at the start of the year but were up nearly 12% in the final two months of 2024, an unusually strong period at the end of the year.
Speculators are now having their most bullish corn views in two years, and fortunately for them, the trade has already accepted that last year’s U.S. corn yields were huge.
Friday will mark USDA’s largest data release of the year, with a primary focus on the latest U.S. corn and soybean harvests. US quarterly stocks, US winter wheat seedings and routine global supply and demand updates will also compete for attention.
American corn and beans
Analysts estimate U.S. corn yields averaged 182.7 bushels per acre, up from 183.1 in November. The trade estimate is more than 5 bushels above last year’s record and above the initial USDA trendline yield for the first time in six years.
Bearish yield outcomes are less likely when estimates are already high, and only four of the 19 analysts surveyed see corn yields rising from November. However, the range of trade estimates (2.4 bpa) is narrower than usual, indicating a potential for surprises.
In the past decade, only once (2019) have analysts anticipated the misdirection of U.S. corn yields in January. They did this three times for soybean yield (2016, 2019, 2022).
But expectations for U.S. soybean yields are slightly off, as the USDA’s cut to its November forecast was the largest single-month cut in 31 years. Trade estimates indicate some uncertainty surrounding U.S. soybean production as margins for both yield and harvested area are historically wide.
Regardless, U.S. soybean supplies are expected to remain ample and at multi-year highs. However, for the first time last month, USDA placed U.S. corn stocks for the 2024-2025 period below the previous year’s level.
If USDA cuts U.S. corn inventories on Friday as expected, it would be the agency’s seventh consecutive monthly cut. Such a trend has not been seen in the past two decades, reflecting the strong demand that has recently driven corn prices higher.
From a market reaction perspective, these demand dynamics could be somewhat isolating if the U.S. corn crop turns out to be larger than expected. The last two times CBOT corn showed a clear negative reaction on January reporting day were in 2012 and 2024, the latter fueled by a huge yield that exceeded all trading estimates.
American WHEAT
USDA won’t officially release 2025-2026 outlooks until May, but the wheat market will get its first piece of U.S. crop information for 2025-2026 on Friday with the Winter Wheat Planting Survey. Total (EPA:) U.S. winter wheat acreage is pegged at 33.37 million acres, very close to both last year and the five-year average.
Analysts have had difficulty anticipating the planting research over the past two years. Last year it was almost 1.4 million hectares too high, but in 2023 it fell by almost 2.5 million hectares.
Wheat traders are struggling to find viable bullish stories even as wheat stocks among major exporters have fallen to a 17-year low. Another big miss in U.S. wheat acreage could support or undermine recent sentiment.
SOUTH AMERICA
US crops are likely to dominate the headlines on Friday, but it’s not too early to look for forecast changes in South America. Analysts see USDA set to increase Brazil’s soybean harvest to a record 170.28 million tons in 2024-2025, up from the previous 169 million.
USDA has increased Brazil’s soybean harvest in three of the past eight Januarys, both in terms of area and yield improvements, and many industry participants have already anticipated a figure north of 170 million tons.
For Argentina, there are already fears that persistent dry weather could ultimately justify a bigger cut in soybean and corn harvests than expected for Friday. American and European weather models on Thursday remained scant on rainfall over the next two weeks.
USDA already increased Argentine soy production on a larger area last month. The agency increased the harvest last January but reduced it in the previous three Januarys. Current harvest conditions are slightly worse than a year ago, but better than in the previous three years.
Karen Braun is a market analyst for Reuters. The opinions expressed above are her own.
