USDA Report Review

While Texas and Florida try to recover from Hurricanes Harvey and Irma, Midwestern corn and soybean prices were hit by Hurricane WASDE Tuesday, left in the wake of another batch of higher row-crop estimates from USDA.

USDA's new corn yield estimate of 169.9 bushels per acre likely created enough gasps around the country to create the low pressure cell that triggered Tuesday's storm of selling. Analysts surveyed by Dow Jones and others were looking for something closer to 168 bushels after this year's adverse growing weather, but what we saw instead was an increase in USDA's corn crop estimate to 14.18 billion bushels.

Throw in a 50-million-bushel-reduction in the new-crop demand estimate, and USDA's new estimate of 2017-18 U.S. ending corn stocks climbed to 2.335 bb, or 16.4% of annual use -- the highest ending stocks-to-use ratio in 12 years.

With a larger U.S. crop expected, USDA's estimate of world ending corn stocks also came in higher than expected at 202.47 million metric tons. USDA's estimate of world corn demand was cut by over 4 mmt and accounted for most of this month's bearish change.

Turning to soybeans, some may look at the numbers and wonder why November soybeans closed down 9 1/2 cents. After all, USDA's estimate of old-crop U.S. ending soybean stocks was reduced from 370 mb to 345 mb, and new-crop ending stocks held pat at 475 mb.

However, markets can be emotional and traders certainly showed a bearish emotional response to USDA's higher yield estimate of 49.9 bpa and higher crop estimate of 4.43 bb. And yes, if true, that will be another record soybean harvest for the U.S.

Demand continues to be the best hope for higher soybean prices, and Tuesday's report increased old-crop exports by 20 mb, new-crop exports by 25 mb, and China's import estimate by 1 mmt (roughly 37 mb). USDA's estimate of 2017-18 world ending soybean stocks was trimmed slightly to 97.53 mmt and is up only slightly from the previous season's 95.96 mmt.

Wheat was also in the vicinity of Hurricane WASDE on Tuesday, but like that one house on the beach that escapes unscathed, December Chicago wheat ended the day 7 1/4 cents higher. USDA left its domestic estimates untouched with ending stocks staying at 933 mb.

A revision from a prior year helped take USDA's estimate of world wheat ending stocks slightly lower, from 264.69 mmt to 263.14 mmt. Slight reductions in production estimates were seen for Australia and Europe, but another boost in Russia's estimate put its wheat crop at 81.0 mmt, or 2.98 bb.

As a couple of side notes, it was interesting that USDA boosted its estimate of old-crop sorghum demand 25 mb, taking the estimate for 2016-17 sorghum ending stocks down from 53 mb to 29 mb and the new-crop estimate down from 52 mb to 29 mb.

Also, NASS said that after Hurricanes Harvey and Irma, it would collect updated harvested acreage information for crops in Texas, Louisiana, Florida, Alabama, Georgia, and South Carolina as a part of the October Crop Production report, due out on Oct. 12.

USDA's crop estimates, especially for corn, will continue to be debated in the days ahead, but the estimating process is not yet over. And don't forget that past WASDE reports show a 90% confidence interval of plus or minus 7.6% for corn production. That translates to plus or minus 1 bb on Tuesday's corn production estimate of 14.18 bb.

Todd Hultman can be reached at Todd.Hultman@dtn.com

(AG/ES)

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