US corn production was raised 48 million bu. to 12.358 billion, which was 78 million bu. above the average est. and at high end of the range of estimates.  Harvested acres were raised by nearly 100,000 acres, while the average yield was raised from 146.7 bushels per acre to 147.2.  Offsetting the higher production estimate was a 50 million bu. increase to the export forecast to 1.650 billion. bu.  The higher export forecast was a modest surprise.  The corn used in the production of ethanol was left unchanged at 5.0 billion bu. This also was a surprise as market participants were anticipating a 25 - 50 million bu. increase.  Unless the weekly ethanol production figures start to slow dramatically, look for higher corn usage forecasts in future reports.  As a result, of the supply and demand changes, ending stocks were lowered 2 million bu. to 846 mil., well above the pre-report estimates of 749 million bushels.  US corn supplies, as of Dec 1 reported at 9.642 billion bu. were 250 million bu. above expectations.  World ending stocks were raised 1 million metric tons to 128.1, above the pre-report expectations for a 3 - 4 mmt. decline.  The Argentine production estimate was lowered 3 mmt to 26 mmt, while the Brazilian corn crop was left unchanged at 61 mmt.  Look for further production reductions in South America in future reports, unless weather conditions improve very soon.  Offsetting the Argentine production cut were increases to both the EU and Ukraine corn crops.  China’s production was left unchanged, while their import forecast was increased 1 mmt to 4 mmt.  In the near term I would expect corn prices to remain under pressure, however I would expect them to consolidate above the recent lows of $5.80.  Continued weather concerns over South American crops could easily stimulate a rally back to the $6.50 area.        

US soybean production was raised 10 million bu. to 3.056 billion bu., slightly above the pre-report estimates.  Harvested acres were lowered slightly, while the average yield was increased from 41.3 bushels per acre, to 41.5.  Overall demand was lowered 34 million bu. to 3.011 billion, down 269 million bu. from last year.  Exports were lowered another 25 million bu., while crush was lowered 10 million bu.  As a result, of the supply and demand changes the ending stocks forecast increased to 275 million bu., 40 million bu. above pre-report expectations.  US soybean stocks, as of Dec. 1 at 2.366 billion bu. were also 40 million bu. above expectations.   World ending stocks were cut 1 mmt to 63.5, which is in line with pre-report estimates.  South American soybean production was cut 2.5 mmt, with Argentina down 1.5 mmt to 50.5, and Brazil down 1 mmt to 74.  There were no changes to the Chinese balance sheet.  Here to I would expect soybean prices to remain under pressure in the near term, however I do not expect prices to dip below the $11.00 level unless weather conditions improve dramatically in South America.   

Winter wheat acres at 41.9 million were nearly 1 million acres above expectations.  The HRW wheat acres at 30.1 million were up 1.6 million from year ago and were roughly 500,000 acres above expectations.  The SRW wheat acres at 8.4 million are down 300,000 from last year, and also roughly 500,000 above expectations.  Total wheat demand was increased 9 million bu. to 2.112 billion bu., as food usage was cut 5 million bu., feed use was cut another 15 million and exports were raised 25 million bu.  As a result, ending stocks were cut only 8 million bu. to 870 mil., while expectations were for nearly a 50 million bu. cut.  US stocks as of Dec 1, at 1.656 billion bu., were slightly below pre-report expectations.  World ending stocks were raised 1.5 mmt to 210 mmt, above expectations of a 1 mmt decline.  Wheat production in the former Soviet Union states was increased by nearly 2 mmt. 

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