USDA Reports Preview

By Darin Newsom
DTN Senior Analyst

Average pre-report estimates for USDA's Acreage and quarterly Grain Stocks reports, particularly those for quarterly stocks, show a large variance with DTN analysis following the March 30 reports.

USDA will release the reports at 11 a.m. CDT Thursday.

QUARTERLY STOCKS

The average pre-report estimate for corn came in at 4.528 billion bushels, with a range of 4.625 bb to 4.437 bb. If realized, the average would imply, based on the March 30 quarterly stocks number of 7.808 bb, third-quarter (Q3) demand of 3.28 bb and total demand for the marketing year at 10.859 bb, assuming beginning stocks are still at USDA's June level of 15.392 bb. Both numbers -- quarterly demand and total demand through three quarters -- would be about 2% above five-year averages. DTN's Q3 stocks estimate, based on the Q2 stocks number and average demand, came in at 4.781 bb. Based on export and feed demand from March through April, Q3 demand was likely stronger than normal, possibly as much as what the average pre-report estimate is looking for.

The flip side of the coin exists in soybeans. Using the March 30 quarterly stocks figure of 1.531 bb and subtracting off average Q3 demand, DTN estimated stocks on hand as of June 1 at 761 million bushels. However, the average pre-report estimate came in at 833 mb. If correct, the average estimate would imply Q3 demand was approximately 2% below what has been seen the last five years. It would also imply total demand of 3.753 bb and ending stocks of 397 mb, as compared to USDA's June estimates of 3.780 bb and 370 mb. The implied results do not seem to fit with the strong inverse seen in the futures spreads, suggesting pre-report estimates are too high and that USDA could come in closer to DTN's analysis.

Wheat's quarterly stocks are expected to come in at 982 mb, in line with USDA's June ending stocks estimate of 980 mb. DTN's analysis following the March 30 report came in with a Q4 wheat number of 977 mb. The range of pre-report estimates was relatively large between 1 bb and 953 mb, with bearish futures spreads hinting at slower-than-normal Q4 demand. If so, USDA's quarterly stocks figure could come in toward the higher side of the range.

ACREAGE

Every year, there is a great deal of anticipation for the June Acreage update, though these numbers will continue to be adjusted through the next January report. Nevertheless, these estimates are expected to get the most attention.

The average pre-report estimate for corn planted acres came in at 92.76 million, down from the March 30 Prospective Plantings projection of 93.6 million acres. The range of estimates was moderate, running from an increase to 94 ma to 92 ma. The round numbers would suggest not a lot of scientific thought was put into the pre-report guesses.

Soybeans are expected to account for the bulk of the decrease in corn, with the average pre-report estimate coming in at 83.97 ma. If realized, this would be up 1.73 ma from USDA's March 30 projection of 82.24 ma. What's interesting is that even the low side of pre-report estimates, 82.6 ma, is an increase from March 30. It needs to be remembered that, at the time, USDA was thought to have underestimated prospective soybean plantings. However, the inverted new-crop soybean forward curve continues to reflect a long-term bullish commercial outlook. Therefore, even if an increase in planted acreage is seen, traders aren't convinced expected larger supplies will completely offset growth in demand.

Wheat acres aren't expected to change much from March 30, with only slight adjustments seen across the various classes. The largest change is expected to be in spring wheat, coming in at 11.64 ma as compared to the previous projection of 11.35 ma. Again, bearish futures spreads in the wheat complex in general would suggest that almost any acreage estimate released by USDA will be seen as adding to an already burdensome supply situation.

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Editor's note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CDT on Thursday for a discussion of USDA's Acreage and quarterly Grain Stocks reports. Sign up now at: https://goo.gl/…

QUARTERLY STOCKS (billion bushels)
	6/1/16	Average	High	Low	3/1/16	6/1/15
Corn		4.528	4.625	4.437	7.808	4.453
Soybeans		0.833	0.862	0.784	1.531	0.627
Wheat		0.982	1.000	0.953	1.372	0.752
Grain Sorghum		0.120	0.135	0.105	0.201	0.034
ACREAGE (million acres)					USDA	USDA
	6/30/16	Average	High	Low	3/31/16	Final 2015
Corn		92.76	94.00	92.00	93.60	88.00
Soybeans		83.97	85.70	82.60	82.24	82.65
All Wheat		49.73	50.20	49.10	49.56	54.64
All Winter Wheat		36.29	36.50	36.20	36.22	39.46
Spring		11.64	13.40	11.00	11.35	13.25
Durum		1.99	2.20	1.80	2.00	1.94
Grain Sorghum		7.15	7.45	6.90	7.22	8.46

Darin Newsom can be reached at darin.newsom@dtn.com

Follow Darin on Twitter @DarinNewsom

(AG/CZ)

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