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USDA's Early Glimpse of a New Season

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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USDA's World Agricultural Supply and Demand Estimates (WASDE) report on May 10 will show early estimates for 2019-20 before many of the practical details are known about the new season. Much to the dismay of U.S. producers needing higher prices, early estimates are apt to look a lot like the old ones for 2018-19.

USDA has actually been metering out clues about the new-crop season ever since making long-term projections in November. On May 10 at 11 a.m. CDT, however, USDA will present full tables of new-crop supply and demand estimates for both the U.S. and the world. While Friday's estimates will set the tone for how we anticipate the season ahead, we need to keep in mind the shaky reliability of estimates made this early in the season.

Past May WASDE reports have a 90% confidence interval of plus or minus 114% for U.S. ending corn stocks and plus or minus 102% for U.S. ending soybean stocks. Over the past 37 years, May corn estimates have been evenly divided between too high or too low, while soybean estimates have started too high in May twice as often as they have been too low.

CORN

In the case of corn, there is still a question as to whether old-crop exports will meet USDA's estimate of 2.300 billion bushels (bb) or not. Dow Jones' survey of analysts expects USDA's estimate of old-crop ending stocks to increase from 2.035 bb in April to 2.061 bb in May. The new-crop ending stocks estimate is expected to start at 2.142 bb, based on a 14.765 bb crop in 2019.

Already, we see uncertainty in these new estimates as USDA has pegged corn planting at 23% as of May 5, the slowest progress since 2013. There is a good chance that USDA's corn planting estimate of 92.8 million acres (ma) will not be reached, given the wide array of unfavorable planting conditions around the Corn Belt.

Maybe the sun will pop out and get planters rolling as it did in 2013. However, at that time, field conditions were more favorable than they are in 2019. In 2013, corn gave back 3.6 ma to prevented plantings.

In Brazil and Argentina, corn crops are much further along, and good weather is expected to bring slightly higher crop estimates in May. Dow Jones' survey expects the corn crop estimate to increase from 96.0 million metric tons (mmt) to 96.6 mmt (3.8 bb) for Brazil and from 47.0 mmt to 48.2 mmt (1.9 bb) for Argentina.

USDA's estimate of world ending corn stocks is expected to increase from 314.0 mmt in April to 315.5 mmt (12.42 bb) for the current 2018-19 season. Analysts are predicting world ending corn stocks of 304.0 mmt in 2019-20, but the uncertainties of predicting world demand 15 months in advance, long before South American crops are planted, make all new-crop world estimates suspect.

USDA will also begin showing world ending stocks minus China, which is new to this year's WASDE reports. This feature is helpful in understanding the corn and wheat markets, as China holds large ending stocks of both. Since China does not import or export much of either grain, China's large ending stocks don't have much actual impact on world pricing and makes markets look more bearish than they actually are.

SOYBEANS

For almost a year, I have been saying that U.S. soybean demand is nearly impossible to predict knowing that China is holding a 25% tariff on U.S. soybeans and not knowing how trade negotiations with China will work out. Here in early May, we still have no answer on what trade will look like with the world's largest buyer of soybeans, but we are running out of time for 2018-19. So far, U.S. soybean demand is not doing well with total export commitments down 18% from a year ago.

Dow Jones' survey expects USDA to increase its old-crop estimate of U.S. ending soybean stocks from 895 million bushels (mb) in April to 925 mb in May. That would be a new record high and is at risk of coming in even higher if USDA notices how poorly soybean exports are doing.

For 2019-20, analysts combined for an average guess of 943 mb of U.S. ending soybean stocks, based on a crop estimate of 4.187 bb. I suspect the surveyed analysts are guessing more toward what they think USDA will say Friday than what they actually expect for the new-crop season. We can't ignore the bearish possibility that trade talks will continue into the new-crop season, but few are likely eager to factor that into Friday's new-crop estimate.

World soybean estimates don't mean much to U.S. soybean prices at a time when China is holding a 25% tariff over U.S. soybeans -- but we'll look at the numbers anyway.

Brazil's soybean crop estimate of 117.0 mmt (4.3 bb) is not apt to change much, but analysts expect a slight increase in Argentina's crop estimate, from 55.0 mmt to 55.8 mmt (2.05 bb). USDA's estimate of world soybean stocks on Aug. 31 is expected to increase from 107.4 mmt in April to 109.0 mmt (4.01 bb) in Friday's report.

According to Dow Jones, the new-crop estimate of world soybean stocks on Aug. 31 is expected to start at 113.0 mmt (4.15 bb), which is a little higher than the current season. Again, USDA's new-crop estimate has little meaning at a time when 94% of U.S. soybeans have yet to be planted and South America won't start planting until this fall.

WHEAT

It is no secret that the fundamental outlook for U.S. wheat prices is bearish, and it's difficult to imagine that anything in May's WASDE report will change that. Dow Jones' survey expects USDA to increase its estimate of U.S. ending wheat stocks from 1.087 bb in April to 1.100 bb for 2018-19. The large carry gives the new-crop season a big enough head start that U.S. ending wheat stocks in 2019-20 are expected to total 1.073 bb -- still abundant and not much of a change from the current season.

For 2019, analysts' average guess pegged all U.S. wheat production at 1.92 bb, up from 1.884 bb in the current season. Winter wheat production is expected to increase from 1.184 bb in the current season to 1.287 bb in 2019. USDA's good-to-excellent crop ratings in its Crop Progress report aren't necessarily good guidelines for predicting crop size, but the current 64% rating is the highest in nine years and does support the notion of a somewhat larger crop than a year ago.

On the world scene, the International Grains Council expects a 4% increase in world wheat production in 2019 and higher world ending wheat stocks in 2019-20. However, Dow Jones' survey disagrees, pegging world ending wheat stocks at 272.8 mmt (10.02 bb) in 2019-20, down from 276.1 mmt (10.14 bb) in 2018-19. USDA will make its own call, but the important thing to remember is that Friday's number is just the beginning of the season. There is still plenty of unknowns about the year ahead.

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USDA's May WASDE report will have lots of new numbers to examine and possibly even a surprise or two. Join us Friday at noon CDT for DTN's post-report webinar when I will review USDA's estimates and answer your questions. Sign up for Friday's webinar at: https://dtn.webex.com/…

U.S. ENDING STOCKS (Million Bushels) 2018-2019
May Avg High Low Apr 2017-18
Corn 2,061 2,216 1,935 2,035 2,140
Soybeans 925 1,038 880 895 438
Wheat 1,100 1,187 1,086 1,087 1,099
U.S. ENDING STOCKS (Million Bushels) 2019-20
May Average High Low Outlook
Corn 2,142 2,506 1,694 1,650
Soybeans 943 1,524 786 845
Wheat 1,073 1,173 980 944
WORLD ENDING STOCKS (Million metric tons) 2018-2019
May Avg High Low Apr 2017-18
Corn 315.5 318.0 313.4 314.0 340.4
Soybeans 109.0 115.7 107.0 107.4 99.1
Wheat 276.1 277.5 274.1 275.6 281.9
WORLD ENDING STOCKS (million metric tons) 2019-20
May Avg High Low
Corn 304.00 329.00 271.20
Soybeans 113.00 143.10 100.00
Wheat 272.80 285.00 230.00
WORLD PRODUCTION (million metric tons) 2018-19
May Avg High Low Apr 2017-18
CORN
Argentina 48.2 50.0 46.5 47.0 32.0
Brazil 96.6 98.5 95.0 96.0 82.0
SOYBEANS
Argentina 55.8 57.0 55.0 55.0 37.8
Brazil 116.9 116.0 118.0 117.0 120.8
WHEAT PRODUCTION (million bushels) 2019-20
May Avg High Low 2018-19
All Wheat 1,920 2,044 1,821 1,884
All Winter 1,287 1,400 1,194 1,184
Hard Red 779 905 662 662
Soft Red 277 302 250 286
White 236 270 201 236

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

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Todd Hultman