USDA Reports Preview

So far, 2020 has been a year of nonstop surprises. The latest one, the international spread of the coronavirus, is having an obvious bearish effect on both U.S. commodity and stock prices. USDA's World Agricultural Supply and Demand Estimates (WASDE) report, set for release Tuesday, March 10, is apt to show lower export estimates for U.S. grains in general as gross domestic product estimates shrink around the globe.

CORN

Once again, we find ourselves looking at what is usually a quiet month for a WASDE report and bracing for larger-than-usual changes. Last month, there was a chance of USDA's export estimates having a modestly bullish impact due to the phase-one trade agreement between the U.S. and China. In March, USDA's export estimates are likely to be dialed lower as USDA factors in slower rates of growth around the world due to the spread of the coronavirus.

It is difficult to know just how much USDA might cut corn's export estimate, but there is room to go lower, as U.S. corn export commitments are currently down 34% from a year ago with six months left in the 2019-20 season.

Apparently, analysts are not expecting much USDA response to the coronavirus on Tuesday. According to Dow Jones' survey, the average estimate of U.S. ending corn stocks from analysts was 1.885 billion bushels (bb), down from February's estimate of 1.892 bb.

You may also remember January's WASDE report mentioned a new survey of corn production in five states in early spring. It is difficult to say yet which WASDE report the new survey will show up in, but the March report is not likely as large amounts of unharvested corn remain captive in fields across Northern states.

For world ending corn stocks, analysts expect USDA's estimate to stay unchanged at 296.8 million metric tons (mmt) or 11.68 bb. Brazil's corn crop estimate is slightly lower, at 100.9 mmt or 3.97 bb, while Argentina's corn estimate is slightly higher, at 50.1 mmt or 1.97 bb.

Even though Dow Jones' survey does not expect much change in USDA's new estimates for corn, there is bearish risk in Tuesday's report. New-crop corn estimates will not be a part of Tuesday's WASDE report, but USDA's bearish 2.64 bb ending stocks estimate from the Ag Outlook Forum is still on the minds of many.

SOYBEANS

For soybeans, there is also a risk USDA will lower the export estimate due to the bearish impact of coronavirus on the world's economies. U.S. soybean export commitments are not in as bad a shape as corn, but they are down 13% in 2019-20 from a year ago. Also, Brazil's soybean prices are currently cheaper in the midst of harvesting a record soybean crop.

Dow Jones' survey does not expect much change in USDA's estimates, however, anticipating an increase in the 2019-20 estimate of U.S. ending soybean stocks from 425 million bushels (mb) in February to 440 mb in March.

Production estimates are not expected to change in Tuesday's report and crush demand has been stable so if there is a surprise, it will likely be in USDA's export estimate.

Dow Jones expects the estimate of world soybean stocks to increase slightly, from 98.9 mmt to 100.4 mmt (3.69 bb) in 2019-20. Brazil's soybean crop estimate is expected to stay at 125.0 mmt or 4.59 bb. Argentina's soybean crop estimate is expected to increase from 53.0 mmt to 53.4 mmt or 1.96 bb.

As with corn, Tuesday's report will ignore USDA's new-crop ending stocks estimate of 320 mb from the Ag Outlook Forum. So far, the market has also ignored the new-crop estimate as coronavirus fears continue to keep ag prices under bearish pressure.

WHEAT

It is not the first time we have gone into a WASDE report expecting little change in wheat numbers and that is true again for Tuesday. Dow Jones' survey expects a slight increase in USDA's estimate of U.S. ending wheat stocks, from 940 mb in February to 943 mb in March.

U.S. wheat export commitments are currently up 3% in 2019-20 from a year ago with just three months remaining in the season. That pace is a little below trajectory for USDA's export estimate of 1.000 bb, but if USDA does reduce exports, it shouldn't be by much.

In the case of wheat, there are two factors that should help wheat prices survive the era of the coronavirus. First, wheat demand is a function of population growth and has minimal influence from changes in economic growth. Second, the expectation for a lower growth rate in the U.S. and Tuesday's half-percent rate cut from the Fed contributed to a recent decline in the U.S. dollar index -- a slightly helpful influence for U.S. wheat exports.

As everyone knows, wheat is a world crop, grown on every continent except Antarctica. Dow Jones expects USDA's estimate of world ending wheat stocks to stay unchanged at 288.0 mmt or 10.58 bb.

At the Ag Outlook Forum in February, USDA estimated the lowest ending stocks of U.S. wheat in six years, but that will not be a part of Tuesday's report. Offsetting USDA's slightly bullish view, many are expecting another record world wheat crop in 2020, but of course, it is still early to be confident about that.

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Please join us for a post-report webinar at noon CDT on Tuesday as I discuss USDA's latest estimates and what they mean for corn, soybean and wheat prices. I will also try to answer any related questions you may have. Register now at: https://dtn.webex.com/…

WORLD PRODUCTION (million metric tons) 2019-20
	Mar	Avg	High	Low	Feb
CORN
Argentina		50.1	53.5	49.0	50.0
Brazil		100.9	101.5	99.5	101.0
SOYBEANS
Argentina		53.4	54.2	53.0	53.0
Brazil		125.0	125.5	124.2	125.0
U.S. ENDING STOCKS (Million Bushels) 2019-20
	Mar	Avg	High	Low	Feb	2018-19
Corn		1,885	1,967	1,767	1,892	2,221
Soybeans		440	586	410	424	909
Wheat		943	999	910	940	1,080
WORLD ENDING STOCKS (million metric tons) 2019-20
	Mar	Avg	High	Low	Feb	2018-19
Corn		296.8	299.5	294.9	296.8	320.4
Soybeans		100.4	108.5	98.9	98.9	111.2
Wheat		288.0	289.5	286.3	288.0	278.1

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

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