USDA's December Crop Reports Produced No Real Surprises; Here's Why

USDA's December report is typically one that produces little surprises, and that was largely the case with the latest Crop Production and World Supply and Demand Estimates (WASDE) released Dec. 9. Most of the focus was on wheat, as USDA made little change to corn and soybeans in both the domestic and South American production forecasts.  

USDA made no changes from the November report to the corn and soybean production numbers for this production year. Before the report, the average trade guess was for USDA to lower corn production and raise soybean production.

In wheat, USDA did make a small adjustments, increasing stocks based on reduced exports. USDA says the outlook for exports is for shipments to hit 840 million bushels, which is 20 million higher than last month. USDA also showed projected 2021/22 ending stocks to hit 598 million bushels, which is up 15 million bushels. USDA says that's still 29% lower than last year.

USDA did make adjustments to the South American production number, raising the forecast by 1 MMT for Brazil in the 2020/2021 year. USDA didn't touch the estimates for the 2021/2022 crop.

USDA's decision to leave South America's crop production estimate largely unchanged wasn't a surprise, as analysts say the agency doesn't typically make big adjustments to South America in the December report.

"It was as expected and appropriate considering where we're at right now," says Arlan Suderman of StoneX Group. "The crops look good, both in Argentina and Brazil, that will likely change if the weather models hold true and we stay dry. Now in Argentina in southern Brazil, I don't look for the soybean production estimate of Brazil drop too much, we may see more of a decline in the corn, and then we'll really have to watch the pattern for the Safrinha corn crop."

Are changes on the horizon? Matt Bennett of AgMarket.Net says it really depends on how the weather forecast plays out over the next few weeks. And as South America grows deeper into the growing season, USDA's January Crop Report could show changes.

"I think when we get to January, we're going to know a little bit more," says Bennett. . Maybe we're not going to know quite enough yet. But you know, the crop looks good right now, and La Nina is still in effect. So, there's no question that when you get further into it, the crop is stronger, especially the farther south you go. It can create quite the impact. And so, you know, I guess from South American standpoint, I look for adjustments to be on farther out. January, you might see some minor adjustments. But I think the farther you get in the spring timeframe, the more adjustments you may see."

However, Dan Basse of AgResource Company has offices in South America, and he says with weather concerns, he thinks revisions could be on the horizon for the South America crop. AgResource recently trimmed its South American production, but Basse notes it's still a potential record crop year.