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Anticipating Bullish October Estimates

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CDT Thursday, Oct. 10. (Logo courtesy of USDA)

In a typical year, roughly one-third of corn and soybean harvests are in the wagon with cash prices depressed by the time we get to the October World Agricultural Supply and Demand Estimates (WASDE) report. However, 2019 has not been a typical year. Corn and soybean prices have already traded up from their lows in early September, and lower new-crop ending stocks estimates are anticipated after USDA's Sept. 30 Grain Stocks reports found less-than-expected corn and soybeans on hand as of Sept 1.

USDA will release its latest WASDE and Crop Production reports at 11 a.m. CDT Thursday, Oct. 10.

CORN

Thursday's WASDE report is expected to show bullish changes in corn's balance sheets for 2019-20, but there may be some bearish adjustments as well. Dow Jones' survey of analysts expects USDA to estimate the 2019 corn crop at 13.611 billion bushels (bb), down from last month's 13.799 bb. With the lower crop estimate, analysts expect a lower corn yield of 166.8 bushels per acre (bpa) and a half-million-acre reduction in harvested acres to 81.5 million.

For 2019-20, Dow Jones' survey expects U.S. ending corn stocks of 1.684 bb, down from USDA's September estimate of 2.190 bb. Most guesses ranged from 1.60 bb and 1.84 bb, but there were some outliers, suggesting plenty of uncertainty in this unusual year. Just having new-crop ending stocks below 2 bb will offer psychological relief, as well as more legitimate support for prices.

While I agree with the survey's lower corn-crop estimate of 13.6 bb (or even 13.5 bb) eventually, it is not certain if USDA will be ready to lower the crop estimate that far in Thursday's report. Trying to guess USDA's yield estimates is no easy task and often doesn't square with recent weather trends.

Supporting arguments for lower yields, this year's slow pace of crop maturity -- put at 58% in Monday's Crop Progress report -- was not helped by heavy rain totals in the central and northern Corn Belt during the past month, and colder weather is on the way. There is still a risk of corn crops being lost before harvest.

On the demand side of the ledger, U.S. corn export commitments are down 51% from a year ago after nearly one month in the new 2019-20 season. It would not be surprising to see a 50 million-bushel (mb) reduction in USDA's export estimate, from 2.050 bb to 2.000 bb.

Largely due to bullish adjustments in the U.S., Dow Jones' survey expects world ending corn stocks to drop from 306.3 million metric tons (mmt) to 296.1 mmt (11.66 bb) in 2019-20. Overall, Thursday's new estimates from USDA should provide a more supportive foundation for corn's current prices with more harvest ahead.

SOYBEANS

For U.S. soybeans, Dow Jones' survey estimates a lower crop of 3.571 bb, down from USDA's September estimate of 3.633 bb. The lower crop estimate is accompanied by a little lower yield estimate of 47.1 bpa and a slight reduction in harvested acres, from 75.9 million to 75.8 million.

The U.S. ending soybean stocks estimate for 2019-20 is expected at 510 mb, roughly half of where old-crop ending soybean stocks were estimated at just a couple of months ago. Adverse weather in 2019, plus a reluctance to plant soybeans while the U.S. and China remain locked in a trade dispute, are the main factors behind this season's lower soybean surplus. And we cannot forget this year's soybeans are not in the bin yet.

Dow Jones' range of estimates for ending soybean stocks is 388 mb to 584 mb, reflecting uncertainty not only about what USDA will say Thursday, but also about what else weather may have in store for this year's crop.

For world soybean stocks, the analysts in Dow Jones' survey expect a reduction from September's estimate of 99.2 mmt to 96.9 mmt (3.56 bb). Keep in mind the WASDE report estimates mid-year soybean stocks for Brazil and Argentina, so the surplus appears higher than it actually is. In the current season, USDA estimates Brazil's ending soybean stocks at 169 mb and Argentina's ending stocks at 406 mb.

Generally speaking, Thursday's WASDE report is likely to be supportive for soybean prices, but we also need to remember trade talks with China resume on the same day. They also will have a big say in where soybean prices trade from here.

WHEAT

While significant changes will be taking place in USDA's corn and soybean estimates Thursday, we can't say the same for wheat. Even Dow Jones' pre-report survey expects USDA's estimate of U.S. ending wheat stocks to stay unchanged at 1.014 bb for 2019-20.

On Sept. 30, USDA's Small Grains Summary increased USDA's spring wheat crop estimate to 600 mb. However, there is a chance for a modest reduction, based on adverse weather conditions in the northwestern U.S. Plains and a harvest that is having a difficult time getting to the finish line.

For world ending wheat stocks, Dow Jones' survey expects a slight reduction, from 286.5 mmt to 285.7 mmt (10.50 bb). If true, that would still be a record-high amount of ending wheat stocks for 2019-20. Thursday's new corn estimates may have more influence on wheat prices than USDA's wheat estimates.

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As usual, we will have a webinar at noon CDT Thursday to talk about USDA's new estimates and what they mean for grain prices. Please join us by registering at: https://dtn.webex.com/…

U.S. PRODUCTION (Million Bushels) 2019-20
Oct Avg High Low Sep 2018-19
Corn 13,611 13,758 13,173 13,799 14,420
Soybeans 3,571 3,634 3,473 3,633 4,544
U.S. AVERAGE YIELD (Bushels Per Acre) 2019-20 (WASDE)
Oct Avg High Low Sep 2018-19
Corn 166.8 169.3 164.5 168.2 176.4
Soybeans 47.1 48.1 46.0 47.9 51.6
U.S. HARVESTED ACRES (Million Acres) 2019-20
Oct Avg High Low Sep 2018-19
Corn 81.5 82.0 80.1 82.0 81.7
Soybeans 75.8 77.2 74.5 75.9 88.1
U.S. ENDING STOCKS (Million Bushels) 2019-20
Oct Average High Low Sep
Corn 1,684 1,963 1,257 2,190
Soybeans 510 584 388 640
Wheat 1,014 1,054 965 1,014
WORLD ENDING STOCKS (million metric tons) 2019-20
Oct Avg. High Low Sep
Corn 296.1 301.0 291.0 306.3
Soybeans 96.9 108.8 92.3 99.2
Wheat 285.7 288.7 280.5 286.5

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

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(BE/AG)

Todd Hultman