Not many fireworks from the latest December USDA world supply/demand report that was released over the weekend. Corn was left near unchanged/slightly higher, US wheat ending stocks were upped slightly and domestic carryover projection for soybeans was lowered. So basically it was positive for oilseeds, neutral for corn and slightly negative for wheat.
Bullish markets need to be fed a constant stream of bullish news.
And while US corn ending stocks for the current marketing year are projected to be very tight, the lack of fresh bullish news coming through could generate a short-term weaker tone. Nonetheless, year-end liquidation pressures may gain some traction early before the Jan USDA report and 2011 acreage battle that lies ahead provides market support in the longer-term outlook. Still while there may be a slightly short-term negative tone for corn, US corn continues to see the tightest stocks situation since the 1995/96!
Domestic US soybean ending stocks fall to 165 million bu, due exclusively to increase demand from China. No change to South American crop conditions and Chinese demand remain the key supportive themes.
USDA boosted its estimate of world wheat carryout by 4 mmt to 176.72 mmt (Australia up 1.5mmt to 25.5mmt). Much of the gains were attributed to production revisions higher for both Canada and Australia, though as we know both countries have experienced significant quality downgrades, and thus the high protein market should be well supported until the trade gets a handle on northern hemisphere crop conditions after dormancy.
So while production was raised the quality issue remains a supportive element for wheat markets. Also whispers out from China is that 19% of winter wheat area has been impacted by higher temperatures and limited rain in November (can China keep producing record wheat crops..?). Also another big issue to look for in the next January report is corn/soybean production estimates, with La Nina presence starting to impact on yields in Brazil and Argentina.