Temperatures are a little cooler, the sun goes down a little earlier and harvest has begun in the South. USDA will release its next World Agricultural Supply and Demand Estimates (WASDE) report at 11 a.m. CDT Wednesday, Sept. 12, and much of the focus will be on its new crop estimates for corn and soybeans.
Now that we've had a month to consider USDA's first yield estimate out of the field of a record-high 178.4 bushels per acre (bpa), many are convinced that this year's crop isn't quite that good and are wondering if September's WASDE report will show a slightly smaller estimate. Numerous waves of heavy rain in late August and early September across the central and southern Midwest added to those crop concerns. Dow Jones' pre-report survey of analysts expects USDA to reduce its crop estimate from 14.586 billion bushels (bb) to 14.506 bb, based on a new yield of 177.4 bpa.
History shows that there is still room to argue with USDA, as its September corn production estimate has a 90% confidence interval of plus or minus 7.6%, based on the past 36 years of data. However, it is difficult to argue that, in most areas of the Corn Belt, 2018 growing weather was good for crops overall, and it seems unlikely that the crop could be much -- if at all -- less than 14.5 bb.
The survey also expects USDA to reduce its estimate of U.S. ending corn stocks from 1.684 bb to 1.590 bb, thanks to nearly 15.0 bb of total use in 2018-19. The expected reduction in new-crop corn stocks is a bullish surprise after six consecutive years of good growing weather and shows how well world corn demand has grown in recent years.
World ending corn stocks for 2018-19 are expected to drop slightly, from 155.5 million to 154.4 million metric tons (mmt) (6.08 bb). But much will depend on whether or not USDA agrees to a smaller U.S. crop estimate. Overall, USDA's lower estimate of world ending corn stocks in 2018-19 is down roughly 20% from the previous year and remains a source of support for corn prices, currently depressed by the anticipation of a large fall harvest.
One final note to consider is that, four of the past five Septembers, WASDE reports resulted in modest losses for December corn on report day. That is not too surprising for this time of year when the anticipation of harvest dominates trading and the U.S. has been on a streak of good weather.
While many are expecting a lower corn crop estimate, the same cannot be said for soybeans, as anecdotes from around the country point to an even higher number than the record-high 4.586 bb USDA estimated in August. Dow Jones' survey expects USDA to increase the crop estimate to 4.659 bb based on a record-high yield of 52.5 bpa.
With a bigger crop expected, U.S. ending soybean stocks for 2018-19 are expected to increase from 785 million to 836 million bushels (mb), but this is where the demand footnotes start adding up. On its face, 836 mb of ending stocks is obviously bearish for soybean prices and would likely represent the highest ending stocks-to-use ratio in 11 years.
However, we can't talk about soybean estimates this year without again mentioning the U.S. is in a hostile trade negotiation with China, the world's largest soybean customer. It is very difficult to guess how those negotiations will go or when they might change. China enacted a 25% tariff against U.S. soybeans on July 6, and USDA reduced the U.S. export estimate by 250 mb as a result.
Last week's data from the U.S. Census Bureau shows that U.S. soybean exports actually increased in July to 126 mb from 85 mb last year as other countries more than made up for China's decline. With U.S. soybean prices near their lowest levels in 10 years, U.S. soybean demand in 2018-19 may be stronger than USDA anticipated, and there is room for the exports USDA removed in July to return to the balance sheet.
However, when the demand adjustments will be made is another question, and the September WASDE report may be too soon for USDA to respond. The main point, for now, is that the demand side of the ledger remains fluid, and U.S. ending stocks may be smaller than currently expected.
Dow Jones' analyst survey expects USDA to increase its estimate of world ending soybean stocks from 105.9 mmt to 107.5 mmt (3.95 bb) in 2018-19, based on the higher U.S. crop estimate. In the August WASDE report, (https://www.dtnpf.com/…), USDA expected world soybean demand to be up 4.8% in the new season and for China to import a total of 95.0 mmt -- two figures that will be closely watched on Wednesday.
Over the past five years, November soybeans have been similar to December corn in that they have posted three losses, one big gain and a tie. If there is a surprise in Wednesday's report, it will likely have something to do with soybean demand.
In the August WASDE report, USDA projected a 4% reduction in world wheat production while its overseas colleague, the International Grains Council, later estimated a drop in world production of 5 1/2%. The gap between the two may give USDA room to make further cuts to crop estimates in September. But, according to Dow Jones' survey, analysts are not expecting much.
Dow Jones expects USDA to reduce its estimate of world ending wheat stocks for 2018-19 from 259.0 mmt to 257.2 mmt (9.45 bb). As we've mentioned several times, large ending wheat stocks in China don't have much price impact as long as they don't import or export much. However, ending stocks in the top seven exporters do matter to wheat prices, and those totaled 49.9 mmt (1.83 bb) in the August report, the lowest in six years.
The main lid on wheat prices comes from plentiful U.S. wheat supplies. Dow Jones' survey is expecting 938 mb of U.S. ending wheat stocks for 2018-19, up slightly from last month's estimate. In spite of lower world wheat production in 2018, U.S. wheat exports still aren't generating enough business to dent U.S. supplies.
With row-crop harvest approaching, it is understandable that much of Wednesday's focus will be on crop estimates for corn and soybeans, and another confirmation of large crops is almost certain to keep the market in a bearish mood. However, the more interesting numbers for later in 2018-19 are likely to be found in WASDE's demand figures.
Stay tuned to DTN as our reporters stand ready to give you all the important details of Wednesday's Crop Production and WASDE reports. I will be hosting a post-report webinar at noon CDT on Wednesday from Husker Harvest Days in Grand Island, Nebraska. If you are in the area, please join us at DTN's building, lot #802. Otherwise, sign up for the webinar at
|U.S. CROP PRODUCTION (Million Bushels) 2018-2019|
|U.S. AVERAGE YIELD (Bushels Per Acre) 2018-2019|
|U.S. ENDING STOCKS (Million Bushels) 2018-2019|
|U.S. ENDING STOCKS (Million Bushels) 2017-2018|
|WORLD ENDING STOCKS (Million metric tons) 2018-2019|
|WORLD ENDING STOCKS (Million metric tons) 2017-18|
Todd Hultman can be reached at email@example.com
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