USDA's November World Agricultural Supply and Demand Estimates (WASDE) report on Friday revealed that late-season warmth and dryness did indeed likely clip the top end of yields on both corn and soybeans. Soybeans were the biggest surprise, with yield plunging 1.4 bushels per acre (bpa) just since the October report. However, the soybean market managed to close just 4 cents higher and down more than 14 cents from the daily high at the end of trade on Friday.

Let's take a closer look at some of the changes in both U.S. and world numbers on the USDA WASDE Nov. 8 report.

The survey of Dow Jones traders had expected a modest decline in the corn yield and production on the November WASDE report. As it turned out, the acreage decline was a bit more than expected compared to October. Corn yield fell by 0.7 bpa to a still record-large yield of 183.1 bpa. Production was lowered by 60 million bushels (mb) from October to 15.143 billion bushels (bb) -- still the third-largest U.S. crop production on record. U.S. ending stocks of corn fell to 1.938 bb -- about 19 mb higher than the Dow Jones survey estimate. Despite the yield and production fall, corn demand was left unchanged to account for the solid pace of exports and corn used for ethanol. December corn futures rose to the highest level since June and the sixth consecutive higher close.

On the world front, some notable changes occurred with Mexico corn imports raised by 1.5 million metric tons (mmt) to 24 mmt (945 mb) to account for the rapid pace of buying, while China corn imports fell by 3 mmt to 16 mmt (630 mb), as China has been missing in action with respect to U.S. corn purchases. Exports to southeast Asia were increased by close to 1 mmt to 19.6 mmt (771 mb). Mexico and Southeast Asian corn feed demand were both raised. Exports from Brazil were lowered 1 mmt to 48 mmt (1.89 bb), and from South Africa, exports declined by 400,000 mt to 2.8 mmt (110 mb). World ending stocks on corn fell by a greater-than-expected 2.4 mmt to 304.1 mmt (11.98 bb).

December corn finished a modest 3 1/2 cents higher on Friday after the report.

The biggest surprise in Friday's November WASDE report was the extent of the cut in both U.S. soy yield and production. With Dow Jones traders expecting just a 0.3-bpa fall in yield to 52.8 bpa. The number came in at 51.7 bpa, a hefty 1.4-bpa drop from October, confirming that late-season dryness was responsible for taking the very top end off of the soy yield. Four of the five major producing states, including Illinois and Iowa, had yield and production declines. Production on soybeans fell 121 mb from October while ending stocks fell by a greater-than-expected 80 mb to 470 mb. The ending stocks still figured to be the largest in the past five years. Domestic crush was revised downward by 15 mb, while exports were slashed 25 mb to 1.825 bb. Soybean oil ending stocks, at 1.536 billion pounds (bp), declined from 1.787 bp, leading to the tightest bean oil stocks-to-use ratio of 5.3% -- the smallest since 2006-07. January beans rallied sharply following the report to challenge the 100-day moving average where there was plenty of selling. January finished only 4 cents higher by the closing bell, having fallen 14 cents below the daily high.

Global soybean production was reduced by 3.5 mmt (129 mb), with the lion's share of the reduction in the U.S., at 3.3 mmt (121 mb), with India's production falling by 200,000 metric tons (mt). Global soy ending stocks fell by a greater-than-expected 2.9 mmt to 131.7 mmt (4.8 bb) compared to the Dow Jones estimate of 134 mmt. The market seemed to shrug of the obviously bullish report likely because South American weather continues to be favorable, and the combined South American production is pegged at 19 mmt (close to 700 mb) higher than last year. Brazil soy exports were increased by 500,000 mt to 105.5 mmt (3.87 bb). There were no changes to China's imports or crush.

The November WASDE held little fanfare for the wheat market on the domestic side. With the Dow Jones survey looking for an unchanged wheat ending stocks number of 812 mb, it instead came out 3 mb higher at 815 mb, up 17% from last year. Wheat imports rose by 5 mb to 120 mb, and food use declined by 2 mb to lead the modest change. There were only minor changes in the by-class balance sheets, with hard red spring stocks rising by 4 mb, hard red winter down by 1 mb and soft red wheat stocks falling by 5 mb. The season average farm price on wheat was lowered a dime to $5.60 per bushel.

On the world front, Argentine, Russian and Brazil wheat production each declined by 500,000 mt (18 mb), and wheat production in Kazakhstan increased by 2 mmt to 18 mmt (661 mb). China wheat imports were lowered by 500,000 mt to 11.5 mmt (422 mb), and North African wheat imports rose by the same amount. Russia's feed demand was lowered by 500,000 mt, and despite increased production, exports from Kazakhstan fell by 500,000 mt to 10 mmt (367 mb). World ending stocks for wheat barely budged, moving from 257.7 mmt to 257.6 mmt (9.46 bb). Wheat finished lower for the fourth consecutive day as good rain fell in some key winter wheat areas and the Argentine and Australian wheat harvests advanced.

FINAL THOUGHTS

The fear that late-season warmth and dryness could have clipped corn and soy yield from early harvest estimates proved to be correct. However, the resulting price action may have been deemed disappointing to bullish traders, with the prospect for both South American corn and soy production increases more than enough to offset bullish implications from the report. The next several weeks, traders will likely focus on U.S. export demand and weather in South America.

After the report, Friday closing prices had December corn up 3 1/2 at $4.31, January beans closing up only 4 cents at $10.31, and December Kansas City wheat falling 4 3/4 cents at $5.64 1/4.

Dana Mantini can be reached at dana.mantini@dtn.com

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