USDA Reports Preview

By Darin Newsom
DTN Senior Analyst

When I get set to write these previews, one of the first studies I look at is changes seen each month in soybean and corn ending stocks over the years. It's there that I noticed, was reminded -- though I still have no recollection of it happening -- that USDA, in its November 2016 Supply and Demand report, increased its domestic soybean ending stocks projection by 85 million bushels to a cycle (recall that each crop year has a 15-month cycle from the previous May through the following September Quarterly Stocks report) high of 480 mb. As we all know from the recently passed September Quarterly Stocks report, 2016-2017 ending stocks actually came in at 301 mb, down 37% from USDA's guess.

I quickly looked back at how the market reacted that day. Soybean futures fell 20 cents, and the DTN National Soybean Index (NSI.X, national average cash price) fell 18 3/4 cents. However, it didn't take long for the shock to wear off and the reality of USDA's likely hallucination set in as the NSI.X closed 32 1/4 cents higher for the month and futures showed a monthly gain of 20 1/2 cents.

What does this mean for the 2017 market? Heading into this month's round of reports (USDA's Crop Production and World Agricultural Supply and Demand Estimates will be released at 11 a.m. CST Thursday), pre-report estimates are looking for soybean production to actually come in 27 mb below the October estimate of 4.431 billion bushels (November 2016 saw USDA raise its production estimate by 92 mb from October). That sets the stage for -- well, just about anything. Nobody knows what USDA will do, and anything is possible. It could raise production, lower production, increase ending stocks, or decrease ending stocks. We don't know what it might do because, frankly, it has no idea what it's doing in regard to soybeans. Therefore, as always, it's just better to let the market sort things out on its own.

The number most are looking forward to is USDA's latest guess on corn production. Pre-report estimators continue to cuddle up with where USDA was the month before, coming in at an average of 14.323 bb with average yield of 171.8 bushels per acre. Last month, USDA's guesses came in at 14.280 bb and 171.8 bpa, respectively. Keep in mind that the November number is largely irrelevant, with USDA free to change its mind as it chooses between now and the January "final" production numbers. But folks love to guess about these sorts of things, with the range for domestic ending stocks showing a high of 2.431 bb and a low of 2.212 bb, only a roughly 200 mb difference.

The soybean ending stocks range of pre-report guesses was comical at 121 mb. Think of it this way: USDA came up with 430 mb for its projection in October. The high end of pre-report guesses of 461 mb was a 7% increase, the low end of 340 mb a 21% decrease.

As I said before, nobody has a clue. Domestic wheat ending stocks are expected to come in at 956 mb, down 4 mb from USDA's October guess of 960 mb. The difference isn't enough to warrant much more of a discussion than a simple mention. The market needs to see a dramatically lower number, at some point, to spark noncommercial short-covering in the Chicago wheat market. An official guess below the low end of pre-report estimates of 940 mb would be a step in the right direction.

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Editor's note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CST Thursday for a look at the latest USDA Supply and Demand and Crop Production estimates. Register now at: http://bit.ly/…

U.S. CROP PRODUCTION (Million Bushels) 2017-18
	Nov	Avg	High	Low	Oct	2016-17
Corn		14,323	14,459	14,127	14,280	15,148
Soybeans		4,404	4,467	4,340	4,431	4,296
Grain Sorghum		368	372	364	364	480
U.S. AVERAGE YIELD (Bushels Per Acre) 2017-18
	Nov	Avg	High	Low	Oct	2016-17
Corn		172.3	174.0	170.0	171.8	174.6
Soybeans		49.2	49.9	48.5	49.5	52.0
U.S. HARVESTED ACRES (Million) 2017-18
	Nov	Avg	High	Low	Oct	2016-17
Corn		83.1	83.5	83.1	83.1	86.7
Soybeans		89.4	89.5	88.5	89.5	82.7
U.S. ENDING STOCKS (Million Bushels) 2017-18
	Nov	Avg	High	Low	Oct	2016-17
Corn		2,360	2,431	2,212	2,340	2,295
Soybeans		420	461	340	430	301
Grain Sorghum		30	32	26	28	34
Wheat		956	987	940	960	1,181
WORLD ENDING STOCKS (Million Metric Tons) 2017-18
	Nov	Avg	High	Low	Oct	2016-17
Corn		201.0	203.5	197.6	201.0	227.0
Soybeans		95.5	97.0	93.0	96.1	94.9
Wheat		266.9	269.2	261.0	268.1	256.6

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

Follow him on Twitter @DarinNewsom

(AG/BAS)

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