There were some surprises in the data from the USDA reports this morning. The 2004 corn crop topped 11.8 billion bushels, 60 million more than the November estimate with a 160.4 bushel per acre yield. The bigger crop coupled with a 50 million bushel cut in exports pushed stocks to 1.96 billion bushels for the end of 2004-05. If feed use falls short of USDA's aggressive forecast, corn carryover could easily top 2 billion bushels by next September.

There was very little change for the soybean balance. Production was reduced slightly to 3.141 billion bushels based on a 0.1 bushel per acre cut in average yields. The forecast for crush was raised by 15 million bushels, to 1.66 billion. This puts end-of-year carryover at 435 million bushels, 25 million less than in the December forecast but still up 323 million from a year earlier. The price range was raised by 15 cents, now spanning $4.75 to $5.45 per bushel.

The biggest surprise in the January report was the very low winter wheat seeding number. Winter wheat seedings were reported to be 41.6 million acres, down from 43.35 million last year and about 1.7 million less than the average pre-release estimate. There were huge declines in Arkansas, Missouri, Indiana and Texas. Wet fall weather clearly had an impact on soft red winter wheat acreage, which dropped from 8.2 million acres last year to 6.6 million this year. Evcen with good yields next year total wheat production should remain below the 2.34 billion bushels recorded in 2003.

For the 2004-05 season, USDA made no changes on the supply side of the wheat balance, but did lower demand. Seed use was cut by 5 million bushels and feed use declined by 25 million. That puts ending stocks at 583 million, up from the December forecast of 553 million and year earlier levels of 546 million.

Cotton production was raised by 200,000 bales in the January reports, but exports were raised by the same amount. That leaves cotton carryover stocks at 7.7 million bales for 2004-05, up from 3.5 million last season. USDA cut China's production and boosted their demand and imports. The cotton market faces burdensome supplies, but very strong demand is a positive sign for the future.