USDA Reports Preview

By Darin Newsom
DTN Senior Analyst

Tomorrow, Thursday, Jan. 12, the jolly old elf known as USDA will leave a plethora of presents for world agriculture in the form of annual reports. Fundamental analysts, like kids on that other Christmas Eve, will get no sleep tonight as they anticipate the goodies they'll get to play with for a whole month. Grain producers may also have a fitful night, worrying whether or not Santa once again leaves them nothing but charcoal briquettes (for coal actually has value).

As we look at all the brightly colored packages under the Christmas Tumbleweed (it's been a rough few years in the grain business), we wonder which one to shake first, so naturally we choose the biggest: U.S. production numbers for corn and soybeans. The average pre-report estimate for corn came in at just shy of 15.2 billion bushels, down slightly from December's 15.226 bb. Some finagling has to be done to reach this production number, as it doesn't equate to expected unchanged national average yield and harvested acres estimates. But hey, it's Christmas, things don't have to make sense. U.S. soybean production is expected to come in at 4.380 bb, up from December's projection of 4.361 bb.

The next biggest package is labeled "U.S. Ending Stocks." Inside is the incredible shrinking soybean, a fascinating little trinket that you can set on your windowsill and watch grow smaller from now until the Quarterly Stocks report next Sept. 30. As the table shows, the average pre-report estimate for 2016-2017 U.S. soybeans came in at 468 million bushels, down from USDA's December's projection of 500 mb. U.S. corn ending stocks for 2016-2017 are expected to come in at 2.396 bb, down slightly from USDA's previous projection of 2.403 bb.

The next box is marked "Dec. 1 Quarterly Stocks," an outdated puzzle that usually has an element of surprise. The average pre-report estimate for corn came in at 12.358 bb. If we assume previously discussed production and ending stocks average estimates are in the ballpark of what USDA projects, then total supplies of corn would be decreased to 16.985 bb (December's total was 17.013 bb) and total demand reduced, interestingly enough, by 20 mb to 14.590 bb. The idea that total demand could actually be decreased is fascinating given the pace of Q1 (September through November) corn exports, but the expected quarterly stocks figure implies Q1 demand of approximately 31.7% of estimated total supplies of 14.590 bb, slightly behind the five-year average of 31.8%. Using these same five-year average quarterly demand percentages for the balance of 2016-2017 would project ending stocks at 2.398 bb. If corn holds a surprise, it could be with a lower-than-expected quarterly stocks number, due possibly to a slightly lower production number and larger-than-expected Q1 demand (though the estimated 4.627 bb as of now would already be record large).

Quarterly stocks of soybeans (as of Dec. 1, 2016) had an average pre-report estimate of 2.951 bb. Again using previously discussed production and ending stocks estimates, total demand would be pegged at 4.139 bb, meaning quarterly demand of 1.656 bb, or 40% of total projected demand. This would be above the five-year average of 37.4%, and in line with strong exports from September through November. Projecting forward using average quarterly demand percentages puts 2016-2017 ending stocks at 369 mb, or about 100 mb below the average January pre-report estimate. If USDA comes in close to the expected Q1 and ending stocks estimates, it would imply a larger-than-normal slowdown in demand over the balance of the marketing year.

A little package back behind the Christmas Tumbleweed looks to have already been opened, its contents no longer a surprise. This one is labeled "Winter Wheat Seedings," with further investigation showing it has been sitting here since last September. 2017's all winter wheat is expected to come in at 34.2 million acres, down about 2 ma from the 2016-2017 crop. The bulk of the decrease, 1.5 ma or so, is expected to come from hard red winter. It of the $1-under basis, so no real surprise there. Soft red makes up the balance with white wheat planted acres expected to come in unchanged from the previous year at 3.5 ma.

The last package is wrapped in festive paper left over from last summer's Olympics in Rio de Janeiro, Brazil. This one has a tag reading "World Ending Stocks and Production," a gift expected to be heavily influenced by large Brazilian production numbers of both soybeans and corn. Global ending stocks are expected to show slight reductions for corn, soybeans and wheat, possibly due to reduced production estimates for Argentina in all three grains.

As the old story goes, good luck getting to sleep tonight with visions of sugarplums dancing in your heads.

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Editor's Note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CST on Thursday as he analyzes the wide assortment of government reports out that morning, including the Annual Crop Production Summary, Winter Wheat Seedings, and Quarterly Grain Stocks. Sign up now at: http://www.dtn.com/…

U.S. CROP PRODUCTION 2016-2017 (million bushels)
	Jan.	Avg.	High	Low	Dec.	2015-16
Corn		15,198	15,320	14,999	15,226	13,601
Soybeans		4,380	4,440	4,339	4,361	3,926
Sorghum		463	466	460	462	597
WINTER WHEAT ACREAGE (million acres) 2017-18
	Jan.	Avg.	High	Low		2016-17
All Winter		34.2	36.4	31.7		36.1
Hard Red		25.1	26.7	22.6		26.6
Soft Red		5.6	6.6	4.8		6.0
White		3.5	4.3	3.3		3.5
QUARTERLY STOCKS (billion bushels)
(Report date 1/12/17)	12/1/16	Avg.	High	Low	9/1/16	12/1/15
Corn		12.358	12.540	11.706	1.738	11.238
Soybeans		2.951	3.119	2.785	0.197	2.715
Wheat		2.044	2.139	1.828	2.527	1.746
Sorghum		0.370	0.380	0.363	0.037	0.322
U.S. ENDING STOCKS (billion bushels) 2016-2017
	Jan.	Avg.	High	Low	Dec.	2015-16
Corn		2.396	2.800	2.206	2.403	1.738
Soybeans		0.468	0.515	0.430	0.480	0.197
Sorghum		0.033	0.037	0.290	0.035	0.037
Wheat		1.148	1.340	1.100	1.143	0.976
WORLD ENDING STOCKS (million tonnes) 2016-2017
	Jan.	Avg.	High	Low	Dec.	2015-16
Corn		221.9	225.0	218.0	222.3	209.0
Soybeans		82.5	84.8	79.6	82.9	77.2
Wheat		251.9	254.0	250.2	252.1	240.7
WORLD PRODUCTION (million metric tons)
		2016-17			2015-16
		Jan.	Dec.		Jan.	Dec.
Argentina wheat			14.4			11.3
Australia wheat			33.0			24.5
Argentina corn			36.5			29.0
Brazil corn			86.5			67.0
Argentine soybeans			57.0			56.8
Brazil soybeans			102.0			96.5

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

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