USDA released a slew of reports of Friday, initially sending markets lower. Brian Split of AgMarket.net says the detailed changes in the carryout numbers are to blame for some of the negative reaction.
Split tends to focus on carryout numbers first and says they are pretty neutral.
“The carryout did come down slightly for corn. Not quite as much as what the trade was looking for. So you could say bearish compared to expectations. But in the very big picture, the numbers didn't change a whole lot and didn't change on soybeans at all,” he said.
He says the market reacted negatively a first because of the pre-report expectations.
“But as we see that they're very close where the USDA had them on the December WASDE report, the market kind of came back and is trading near unchanged now,” he added.
Additionally, Split said the market might be surprised to see USDA raise yields on corn and soybeans, one bushel per acre and a half bushel per acre respectively. However, what surprised him were revisions to the feed and residual use category for last year’s crop.
“I think the surprise to me as you get into the numbers was some of the revisions that the USDA made on last year's corn crop,” Split explained. “Number one [they] reduced the feed and residual number. They had actually just bumped it up on the on the October WASDE report because of the results of the September quarterly stocks report. The net change in last year's crop increased the stocks from last year's crop by 107 million bushels. So, USDA based on the quarterly stocks number on this report did come in and increase the feed residual demand by 250 million bushels.”
Split says that change was partially offset by a little increase in production and lower exports.
“The 107 million bushels from last year really kind of took some of the wind out of the sails because without that, our carry out actually would have would have dropped. Not substantially, but we'd be closer to a 1.78, 1.79 type of a carryout for this year's crop.”
Watch the full analysis from Split below: