The USDA World Agricultural Supply and Demand Estimates (WASDE) report for August was a shock, with corn acreage, yield and production well above pre-report expectations, which sent corn to limit losses. While the soybean report was mildly supportive, wheat production was bearish. December corn finished off 25 cents, with September wheat down 25 to 27 cents and November beans down 12 1/2 cents.
The average pre-report trade estimate for corn production was 13.164 billion bushels (bb) with an average yield of 165.3 bushels per acre (bpa) and planted acreage at 87.9 million. The WASDE report, however, had a different idea with an estimated 13.901 bb crop production, 169.5 bpa yield and 90 million acres (ma) planted.
Yield came in 3.5 bpa higher than the July estimate. Production was 26 million bushels (mb) higher than the July estimate and was more than 700 mb higher than expectations. To add insult to injury, USDA lowered both ethanol corn usage and U.S. exports by 25 million and 100 million bushels, respectively. Although the amount of acres enrolled in prevented planting was by far the largest ever, (estimated at 11.2 million acres), the estimate of harvested acres (82 ma) was well above the most optimistic estimate.
USDA employed not only a resurvey of the same 14 late-planted states as those in July, but also utilized satellite imagery and Farm Service Agency (FSA) numbers to arrive at the estimate. (For more information on FSA's estimates, read Chris Clayton's breakdown here: https://www.dtnpf.com/…)
World corn numbers were equally as bearish, with 2019-20 ending stocks of 307.7 million metric tons (mmt) compared to 298.9 mmt in July and trade expectations for 290.9 mmt. World corn production was up 2 mmt, with the Ukraine accounting for a 1.5 mmt gain.
While the focus was clearly on the corn market, soybeans had their own surprises.
Soybean acreage was revealed at 76.7 million planted compared to 80 ma in July. Harvested acres on soybeans was pegged at 75.9 ma compared to the pre-report expectation of 79.3 ma. Soybean yield was left untouched at 48.5 bpa, while production came out at 3.680 bb versus July at 3.845 bb. A bearish change for soybeans was a drop of 100 mb of exports to account for the still unshipped 142 mb that China has on the books.
U.S. ending stocks dropped to 755 mb, which was lower than the trade expectation of 818 mb and much lower than the 2018-19 stocks of 1.070 bb. That's a step in the right direction, but with little change in the U.S.-China trade issue and the demand-dampening impact of African swine fever, it is still burdensome.
Prevented planting acres on soybeans came out at a hefty 4.35 million acres -- the largest ever recorded.
On the world front, it was all about the U.S. as world soybean production was down 5.2 mmt, with the U.S. accounting for 4.5 mmt of that decline. World ending stocks for 2019-20 were 101.7 mmt, compared to July at 104.5 mmt, the average trade estimate of 106.2 mmt and last year's 114.5 mmt. Notably, on the demand side, WASDE lowered China soy imports for 2019-20 to 85 mmt, down 2 mmt. This is still well above estimates from both the Chinese ag ministry and the U.S. ag attache. With the African swine fever impact, it is possible to see this fall to closer to 80 mmt in future reports.
The soybean report was considered supportive, but soybeans fell victim to the corn shock, and fund traders, who entered the day still short soybeans, were likely capitalizing by selling more.
As with corn, it's possible we could see yields decline in future reports, based on very poor conditions and dryness in areas of the Eastern Corn Belt from eastern Iowa into Ohio.
Coming into the August WASDE report, all eyes were on corn first, soybeans second and wheat was a distant third. However, it turns out that wheat had its own issues.
Wheat yield was pegged at 51.5 bpa, compared to 50 bpa in July. All wheat production at 1.980 bb, 59 mb higher than July and 55 mb above the average trade estimate. Much of the difference was in the hard red winter (HRW) wheat market, where production was pegged at 840 mb versus an average estimate of 811 mb and July's 805 mb. Other spring wheat gained 25 mb from July and was 27 mb higher than the average estimate.
World wheat ending stocks were recorded at 285.4 mmt, down from 286.5 mmt in July but still well above the 275.5 mmt last year. Major exporter wheat production was only down 1 mmt from July, with modest drops of 1.3 mmt in the EU and 1 mmt in Russia. That was disappointing to wheat bulls who touted for weeks the extreme heat wave seen in much of Western Europe and parts of the Black Sea.
Dana Mantini can be reached at email@example.com
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