Two weeks before Christmas, USDA is set to release its December Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, due out at 11 a.m. CST on Tuesday, Dec. 11. The December reports probably won't shed any light on this year's harvest difficulties in the U.S., but could increase South America's crop estimates.
USDA's final Crop Progress report of 2018 showed 94% of the corn crop harvested as of Nov. 25, the last official word we have received on this year's harvest. Since then, we have seen winter storms across the Midwest and some severe weather, but also several clear days for harvest progress to be made in many areas.
Traditionally, USDA does not change its crop estimates for corn or soybeans in the December WASDE report, as there is no supporting help from NASS. The next update of U.S. corn and soybean crop estimates is set for Jan. 11 when USDA will also have a measure of Dec. 1 grain stocks.
Knowing that limitation helps us understand why Dow Jones' pre-report survey of analysts expects only minor tweaks to USDA's domestic numbers on Tuesday. U.S. ending corn stocks for 2018-19 are expected to increase slightly, from 1.736 billion to 1.744 billion bushels (bb). The range of estimates runs from 1.682 bb to 1.786 bb, if we ignore Western Milling's low 1.585 bb and INTL FCStone's high 2.058 bb estimates.
A minor change in December's ending corn stocks estimate is not unreasonable. But if there is a surprise for corn, it should be to the lower end of the range, as ethanol production has maintained a steady pace and total corn export commitments are up 17% from a year ago, well above USDA's estimate for a 1% increase in 2018-19.
For the world estimates, Dow Jones' survey expects USDA's estimate of 2018-19 world ending corn stocks to increase from 307.5 million metric tons (mmt) to 308.4 mmt (12.1 bb) with good weather in South America possibly boosting crop estimates in Brazil and Argentina. If close to being true, USDA's estimate of world ending corn stocks will be down 12% from two years ago and remain a source of support for cash corn prices that are still near the lower end of their 10-year range.
As with corn, USDA's soybean crop estimate is likely to remain unchanged at 4.60 bb, in spite of significant harvest problems since fall. Analysts in Dow Jones' survey are predicting a small reduction in USDA's estimate of U.S. ending soybean stocks, from 955 million bushels (mb) to 938 mb. If we throw out the low and high estimates, the range of Dow Jones' survey narrows to 830 mb to 970 mb.
Judging from the lower average estimate, analysts are not expecting USDA to make much change in the soybean export estimate, but that is where the risk to soybean prices remains the most obvious.
The most recent export figures from USDA show total soybean export commitments down 33% from a year ago, still far below the 11% reduction that USDA is currently anticipating. At the same time, we can't become too confident in the extreme bearish scenario, as it is possible that the U.S. and China are getting closer to a workable agreement for both sides.
The key point for soybean prices ahead is that this market continues to deal with a wide degree of uncertainty, depending largely on the future of trade with China. Meanwhile, South America's weather is giving crops a good start in late 2018, and we expect to see higher crop estimates for Brazil and Argentina on Tuesday.
Dow Jones' survey expects USDA's estimate of world ending soybean stocks to increase from 112.1 mmt to 113.2 mmt (4.16 bb). Keep in mind that USDA's "ending stocks" figures for Brazil and Argentina are midseason measures, much higher than the actual ending stocks of their local seasons.
After seeing a modest reduction in world wheat production for the first time in six years, the most interesting findings in Tuesday's report for wheat will likely be last-minute changes to any of this year's crop estimates. I can't say any will be large enough to rock wheat prices either direction, but a surprise is always possible.
Dow Jones' survey expects USDA to increase its estimate of world ending wheat stocks from 266.7 mmt to 267.3 mmt (9.82 bb), still the first annual reduction in six years. USDA's estimate for U.S. ending wheat stocks is expected to increase from 949 mb to 969 mb, likely based on a slow pace of U.S. wheat exports that just showed a little improvement on Friday.
The recent history of the December WASDE report has been muted for corn with four of the past five years resulting in report day moves of 2 cents or less. For soybeans, a bearish outcome is common as three of the past five years saw prices drop on report day, while 2015 resulted in a draw.
Unless USDA surprises us with a larger-than-expected change in an export estimate, there probably won't be much price response from Tuesday's new numbers, and the market's focus will likely return to the latest trade news once USDA's report is digested.
Stay tuned to DTN on Tuesday for a complete report of the most important numbers as they become available after 11 a.m. CST. At noon CST, join DTN's post-report webinar where I will be explaining what the day's numbers mean for grain prices. Sign up for Tuesday's webinar at: https://dtn.webex.com/…
|U.S. ENDING STOCKS (Million Bushels) 2018-2019|
|WORLD ENDING STOCKS (Million metric tons) 2018-2019|
Todd Hultman can be reached at firstname.lastname@example.org
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