USDA Reports Preview

By Darin Newsom
DTN Senior Analyst

USDA's August Crop Production and Supply and Demand reports are expected to show big numbers, making any type of bullish argument more difficult.

USDA will release the reports at 11 a.m. CDT on Friday.

CORN

For corn, the August report comes down to three numbers: New-crop national average yield, total production and ending stocks. Everything else is simply secondary parts that make up the bigger picture. At DTN's pre-report meeting (before estimates were known), I was asked what the tipping point for bearish/bullish yield might be. Given how many early private estimates had lined up near 175 bushels per acre, my guess was 170 bpa. Strangely enough, as the table shows, the average estimate came in at 170.8 bpa.

The question is, would Watson (large international computerized investment traders) view a USDA number of 170 million bushels as bullish? Leaving harvested area unchanged from July at 86.6 million acres would put 2016 production at 14.7 billion bushels. Adding that to July's beginning stocks (old-crop ending stocks) of 1.701 bb and leaving demand unchanged would result in ending stocks climbing to 2.25 bb. This would still be below the 2.437 bb calculated at the end of the 2007-08 marketing year, but would it be considered bullish?

Revising for the slightly larger, yet in my opinion still underestimated due to slow export pace, average old-crop ending stocks estimate of 1.720 bb pushes new-crop ending stocks to 2.274 bb. This is close enough to be considered in line with the pre-report average of 2.287 bb, but also suggests a leaning toward a slight reduction in new-crop demand as well.

Looking at it this way, a USDA yield estimate of 170 bpa, and corresponding production figure of 14.7 bb, may not be low enough to spark buying interest from Watson.

But what if USDA comes in near the high side of pre-report estimates at 175 bpa? It's unlikely, but not impossible, USDA would make such a jump. However, the August round of reports are billed as the first survey-based, meaning "data from the yield surveys reflect conditions as of the first of the month, as data are collected during the last week of the previous month and the first two or three days of the current month." (USDA: Understanding USDA Crop Forecasts) Furthermore, crop production forecasts assume "normal" weather conditions for the balance of the growing season. This leaves the door open to USDA to make dramatic yield and production adjustments from previous reports. The high end of estimates for new-crop ending stocks at 2.653 bb reflects the possible 175 bpa average yield minus an increase in demand from July.

SOYBEANS

The situation in soybeans is similar with Watson again likely to focus on changes to national average yield, total production and ending stocks. The average pre-report estimate for yield came in at 47.6 bpa, resulting in an average production figure of 3.949 bb. The latter would be a new record, just out-touching 2015's 3.929 bb and 2014's 3.927 bb. Average ending stocks were pegged at 323 mb, well above July's 290 mb and accounting for a lower beginning stocks estimate of 328 mb due to a slight increase in old-crop demand.

The bottom line is, unless yield and production come in well below expectations, USDA's August soybean numbers are expected to be bearish. While this is in disagreement with what the market's bullishly inverted forward curve shows, it would be the numbers Watson will work with at least until the September round of USDA reports.

WHEAT

Global wheat estimates will likely draw the most attention given all the headlines and hubbub over expected production problems in Europe. However, the average pre-report estimate for new-crop world ending stocks came in at 251.50 million metric tons, down only slightly from July's 253.70 mmt and still well above the expected old-crop figure of 244.20 mmt. If realized, this would continue the argument that global wheat stocks are burdensome for at least another month.

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Editor's note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CDT Friday as he takes a look at the latest USDA Crop Production and Supply and Demand and report estimates. To register, visit: http://www.dtn.com/…

U.S. CROP PRODUCTION (Million Bushels) 2016-2017
	Aug	Avg	High	Low	July	2015-16
Corn		14,784	15,146	14,590	14,540	13,601
Soybeans		3,949	4,054	3,865	3,880	3,929
Grain Sorghum		430	450	410	407	597
All Wheat		2,269	2,360	2,061	2,261	2,052
All Winter		1,630	1,682	1,589	1,628	1,370
Spring		546	576	509	551	599
U.S. AVERAGE YIELD (Bushels Per Acre) 2016-2017
	Aug	Avg	High	Low	July	2015-16
Corn		170.8	175.0	168.6	168.0	168.4
Soybeans		47.6	48.8	46.7	46.7	48.0
Grain Sorghum		66.2	68.3	65.1	65.1	76.0
U.S. ENDING STOCKS (Million Bushels) 2016-2017
	Aug	Avg	High	Low	July
Corn		2,287	2,653	2,091	2,081
Soybeans		323	403	260	290
Grain Sorghum		56	66	46	46
Wheat		1,115	1,213	1,080	1,105
U.S. ENDING STOCKS (Million Bushels) 2015-2016
	Aug	Avg	High	Low	July	2014-15
Corn		1,720	1,903	1,671	1,701	1,731
Soybeans		328	370	285	350	191
Grain Sorghum		50	60	40	45	18
WORLD ENDING STOCKS (Million metric tons) 2015-2016
	Aug	Avg	High	Low	July	2014-15
Corn		206.30	208.00	203.00	206.90	208.51
Soybeans		71.40	72.70	70.00	72.20	78.41
Wheat		244.20	245.00	241.40	244.50	217.40
WORLD ENDING STOCKS (Million metric tons) 2016-17
	Aug	Avg	High	Low	July
Corn		211.80	228.70	201.20	208.40
Soybeans		67.40	69.50	64.50	67.10
Wheat		251.50	255.30	244.30	253.70

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

Follow Darin Newsom on Twitter @DarinNewsom

(AG/BAS)

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