After a stretch of hot and dry weather in August, USDA accepts field data for the first time in 2020 and provides corn and soybean crop estimates that are apt to set a tone for the rest of the year.
On Aug. 12, USDA estimated a corn crop of 15.278 billion bushels (bb) and U.S. ending corn stocks of 2.756 bb -- two heavily bearish totals that should be lowered Friday.
Two days before the August report, the now-famous derecho swept across central Iowa and into neighboring states, flattening crops, farm buildings and bins on a scale not seen by a typical tornado or hailstorm. At the same time, the forecast for much of the Corn Belt turned hot and dry, sapping moisture from crops at a time they are normally filling out.
For the first time in 2020, USDA will have access to field data when constructing the crop estimates for corn and soybeans. For our purposes, it is important to remember a surprise is always possible when the estimates transition from visual crop appearance to inspecting cobs and kernels.
It is difficult for private crop estimates to anticipate what USDA will say on Sept. 11, but the pre-report survey of analysts by Dow Jones expects USDA to reduce the U.S. corn crop estimate to 14.833 bb, based on a national yield of 177.7 bushels per acre (bpa). The ending stocks estimate is anticipated at 2.439 bb or roughly 17% of annual use.
If true, that would suggest cash corn prices in the low $3s -- still a bearish scenario, but not as extreme as the August report.
The other change since the August report is the increase in new-crop corn sales -- a bullish surprise from China. As of Sept. 9, the U.S. has 685 million bushels (mb) of new-crop corn sales on the books, the most for this time of year in at least eight years. USDA may not increase its 2.225 bb corn export estimate for 2020-21 on Friday but at least it will look more credible.
Dow Jones' survey expects USDA to reduce its estimate of world ending corn stocks from 317.5 million metric tons (mmt) in August to 310.4 mmt (12.22 bb) Friday, largely due to the changes anticipated in the U.S. No major changes are expected for South American estimates.
As with corn, soybean supply estimates are also expected to be reduced after a month of dry weather and active export sales. Dow Jones' survey is looking for USDA's soybean crop estimate to come down from 4.425 bb in August to 4.286 bb Friday, based on a lower yield of 51.6 bpa.
USDA's estimate of U.S. ending soybean stocks is also expected to be adjusted lower, from 610 mb in August to 461 mb (or roughly 11% of annual use). If true, that historically correlates to cash soybean prices near $10, well above the $9.24 that DTN's National Soybean Index currently sits at.
The more important part of this scenario is that new-crop soybean sales total 960 mb as of Sept. 9, which is 45% of USDA's export estimate for the entire 2020-21 season. With FOB soybean prices in Brazil now 53 cents above those at the U.S. Gulf, more U.S. soybean sales are likely, but it is difficult to know how far China will go with its purchases.
For now, China's purchases have fueled noncommercial buying and pushed November soybean prices near their highest level in two years, creating a potentially volatile scenario for how the market may respond to Friday's new estimates, should any surprise emerge.
From a world perspective, Dow Jones' survey is looking for a small decline in USDA's world soybean stocks estimate, from 95.4 mmt to 93.2 mmt (3.42 bb). So far, the forecast for Brazil remains dry and planting has not yet started. USDA's South American soybean estimates probably won't show much change Friday and are already anticipating increased soybean plantings in Brazil.
Unlike corn and soybeans, not much has changed for the wheat market since last month, other than wheat prices are higher, thanks largely to bullish changes in corn, as described above. Those changes also triggered short-covering among bearish funds that were surprised by corn's bullish influence.
Watchers of wheat will not be surprised to hear USDA is likely to keep its estimate of world wheat production and world ending wheat stocks at record high levels for 2020-21. Dow Jones' survey expects USDA to slightly lower its estimate of world ending wheat stocks from 316.8 mmt to 316.1 mmt (11.61 bb).
The usual major wheat crop estimates will be watched with another increase possible for Russia. I can't find an obvious reason to expect a slight reduction of wheat stocks Friday. It's a normal human tendency for analysts to want to give wheat producers a break, but it doesn't seem to stop USDA from delivering a more bearish estimate when the time arrives.
For the U.S., Dow Jones' analysts expect only a slight change in USDA's estimate, from 925 mb of U.S. ending wheat stocks in August to 926 mb Friday. With wheat already trading at fundamentally cheap prices, a sideways trading range seems likely this fall.
Join us Friday, Sept. 11, at noon CDT, as we discuss USDA's latest supply and demand estimates and what they mean for grain prices. I'll also be happy to answer any market-related questions you may have. Register now at: https://dtn.webex.com/…
|U.S. PRODUCTION (Million Bushels) 2020-21|
|U.S. AVERAGE YIELD (Bushels Per Acre) 2020-21 (WASDE)|
|U.S. ENDING STOCKS (Million Bushels) 2019-20|
|U.S. ENDING STOCKS (Million Bushels) 2020-21|
|WORLD ENDING STOCKS (Million metric tons) 2019-20|
|WORLD ENDING STOCKS (million metric tons) 2020-21|
Todd Hultman can be reached at email@example.com
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