USDA Reports Preview

By Darin Newsom
DTN Senior Analyst

Like a standard deck of cards, DTN's June USDA report preview table spans 52 lines on an Excel worksheet. The key to market reaction to the report could be any one of the items on those lines.

USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CDT Friday. Here's a look at what we could see in each of the reports.

U.S. CROP PRODUCTION

Here we have the same collection as always, once again led by the hoopla surrounding corn and soybeans. The average pre-report estimate for corn came in at 14.022 billion bushels, down from USDA's third initial guess of 14.065 bb released in May. Meanwhile, the average estimate for U.S. corn's national average yield came in at 169.7 bushels per acre as compared to May's 170.7 bpa. A quick multiplication of expected harvest acres and new national average yield results in a problem: It doesn't add up to the reduced production number. The only way to come in at 14.022 bb with a 169.7 bpa yield is to raise harvested area by 200,000 acres. Given that, it seems corn, based on nothing more than simple guesses about yield and production, is poised for some sort of a surprise.

U.S. soybean production for 2017 is also expected to decrease slightly, due in part to a fractional decrease in national average yield. Similar to corn, the multiplication doesn't equal what one would think it should. Does it matter all that much? Probably not, since everything is averages multiplied by averages, with all of the numbers still variables.

And then there's wheat. All U.S. wheat production is actually expected to increase slightly from May, by a scant 5 million bushels, though a slight decrease of winter wheat production is the general consensus. This would suggest a slight increase in spring wheat production, a possibility that seems ludicrous given the ongoing weather across the U.S. Northern Plains growing area.

ENDING STOCKS

Here's where things could get interesting. If you recall, USDA has a seasonal tendency to reduce old-crop U.S. soybean ending stocks with the May-to-June cut averaging about 20 mb the last three years. If that is the case again this year, 2016-2017 U.S. soybean ending stocks could come in at 415 mb as opposed to the average pre-report estimate of 432 mb. How would the decrease be accounted for? The most likely candidate is an increase in old-crop export demand, followed by a decrease in 2016 production, and finally an upward adjustment to our old friend "residual demand." As for new-crop ending stocks, the average pre-report estimate came in precariously close to 500 mb despite the expected small decreases in expected production and old-crop ending stocks. Again, don't put a lot of effort into tying all these pre-report numbers together.

U.S. corn ending stocks, both old-crop and new-crop, are expected to decrease slightly. The key could be old-crop, with all eyes on whether or not USDA finally changes its export demand figure of 2.225 bb that has been in place since last October. As of last Thursday's weekly Export Sales and Shipment report, for the week ending Thursday, May 25, total marketing-year shipments of corn implied final demand of 2.460 bb. Such a number could create a bit of a stir in the old-crop cash and futures markets.

On the other end of the spectrum, both old-crop and new-crop world ending stocks of corn and soybeans are expected to increase slightly. The reason is the usual suspect -- another round of increases for both old-crop and new-crop production in Brazil and Argentina. World wheat ending stocks, both old crop and new crop, are expected to decrease slightly from the May WASDE report.

THE BOTTOM LINE

USDA's June report, however it turns out, could have a shelf-life of roughly 10 seconds. Consider this: The report comes out on a Friday. Weather forecasts are calling for above- to much-above-average temperatures for the coming weekend for the majority of U.S. growing areas. Anecdotal evidence would suggest corn and spring wheat crops are already barely hanging on due to weather, with the winter wheat crop being harvested already showing some signs of previous suffering. A normal growing season Friday session can be chaotic due to weather forecasts. Add in the net-short futures positions held by noncommercial traders and things could go ballistic. But -- and this is important -- not to the point of breaking already established trends that have been discussed on DTN. So, in the end, the 52 standard cards in the deck most likely won't decide the fate of the grain markets Friday, but the Joker known as weather will.

P.S.: Those of you subscribed to DTN Six Factor Strategies, be sure you are familiar with standing recommendations heading into the reports. Most likely, some of these will be filled. Know if you have open orders with your broker or merchandiser and be expecting a possible call as the day progresses.

U.S. ENDING STOCKS (Million Bushels) 2016-2017
	June	Avg	High	Low	May	2015-16
Corn		2,284	2,360	2,215	2,295	1,737
Soybeans		432	461	400	435	197
Grain sorghum		47	51	43	48	37
Wheat		1,158	1,177	1,140	1,159	976
U.S. ENDING STOCKS (Million Bushels) 2017-2018
	June	Avg	High	Low	May
Corn		2,073	2,139	1,840	2,110
Soybeans		498	668	458	480
Grain sorghum		22	28	20	24
Wheat		909	995	860	914
U.S. CROP PRODUCTION (Million Bushels) 2017-2018 (WASDE)
	Jun	Avg	High	Low	May	2016-17
Corn		14,022	14,065	13,855	14,065	15,148
Soybeans		4,229	4,255	4,102	4,255	4,307
U.S. AVERAGE YIELD (Bushels Per Acre) 2017-2018 (WASDE)
	Jun	Avg	High	Low	May	2016-17
Corn		169.7	170.7	165.7	170.7	174.6
Soybeans		47.6	48.0	46.0	48.0	52.1
WINTER WHEAT PRODUCTION (Million Bushels) 2017-2018
	June	Average	High	Low	May	2016-17
All Wheat		1,825	1,866	1,800	1,820	2,310
All Winter Wheat		1,245	1,292	1,220	1,246	1,672
HRW		734	783	714	738	1,082
SRW		296	310	290	297	345
White		215	231	207	212	245
WORLD ENDING STOCKS (Million metric tons) 2016-2017
	June	Avg	High	Low	May	2015-16
Corn		224.0	226.8	221.5	223.9	212.4
Soybeans		91.0	92.4	90.0	90.1	77.1
Wheat		255.2	256.1	253.3	255.4	242.4
WORLD ENDING STOCKS (Million metric tons) 2017-2018
	June	Avg	High	Low	May
Corn		195.4	197.3	193.4	195.3
Soybeans		89.5	90.7	88.8	88.8
Wheat		257.7	260.0	256.0	258.3
WORLD PRODUCTION (Million Metric Tons) 2016-2017
	May	Avg.	High	Low	May	2015-16
Corn
Brazil corn		96.5	98.0	96.0	96.0	67.0
Argentina corn		40.3	42.0	40.0	40.0	29.0
Soybeans
Brazil soybeans		112.3	113.2	111.5	111.6	96.5
Argentina soybeans		57.4	58.2	57.0	57.0	56.8

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

Follow Darin Newsom on Twitter @DarinNewsom

(AG/CZ)

Copyright 2017 DTN/The Progressive Farmer. All rights reserved.