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Anticipating Lower Corn Stocks Friday

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 Friday, July 10. (Logo courtesy of USDA)

Fresh off USDA's lower-than-expected corn planting estimate of 92.0 million acres, traders are expecting to see a new, lower estimate of U.S. ending corn stocks from USDA on Friday, July 10, at 11 a.m. CDT. New USDA estimates of U.S. soybean demand and international wheat crop estimates will also be of interest.

CORN

Just over a week ago, analysts in Dow Jones' survey were expecting USDA to say 95.2 million acres (ma) of corn was planted, large enough to support a 16.0-billion-bushel (bb) crop with a little help from weather. Instead, USDA surprised us with a 92.0 ma planting estimate and a lean harvested acres estimate of 84.0 million. Analysts in Dow Jones' survey are now expecting USDA to peg the 2020 corn crop at 15.06 bb, based on a slightly higher yield of 178.9 bushels per acre (bpa).

There is a good chance USDA won't actually change the yield estimate in July and will probably stick with the low harvested acre estimate until proven otherwise, meaning a 15.0 bb crop estimate is reasonable in this particular report.

I have to mention, however, USDA's planting estimates for corn, soybeans and wheat are down 5.8 ma in 2020 from 2018. Nearly 2 ma switched to smaller crops, and it's possible 3.8 ma opted out this year as concerns about the economy and the coronavirus ran high at planting time.

Heavy on the minds of many is a risk that USDA will somehow find more acres later this year -- a risk that may keep traders cautious about USDA's corn estimates on Friday. The first report of prevented plantings from the Farm Service Agency is expected in August.

As usual, weather will have the final say on 2020 production, and so far, USDA's good-to-excellent corn crop rating of 71% suggests the yield will come in above trend. However, it is still early, and dry weather has been a concern in the Eastern Corn Belt where crop ratings are lower.

On the demand side, USDA found 5.224 bb of corn on hand as of June 1, 234 million bushels (mb) more than was expected. Dow Jones' survey expects USDA to estimate 2.728 bb of new-crop ending stocks Friday, down from 3.323 bb in June.

With the crop estimate down roughly 1.0 bb and the ending stocks estimate down roughly 600 mb, analysts are expecting roughly 400 mb of demand cuts in Friday's report. The cuts will fall mostly on the old-crop season. Ethanol is the primary suspect, as the most recent report from the U.S. Energy Department shows U.S. ethanol production increasing but still down 17% from a year ago.

USDA's corn export estimate of 1.775 bb has a good chance of being met, if shipments stay active. That leaves USDA's 5.700 bb estimate of feed and residual demand as the other candidate for a cut on Friday.

USDA's lower ending stocks estimate for U.S. corn should also contribute to a bullish adjustment in world estimates. Dow Jones' survey expects USDA to lower its estimate of world ending corn stocks for 2020-21 from 337.9 million metric tons (mmt) to 325.6 mmt, or 12.82 bb. The 29% ending stocks-to-use ratio will still be higher than the previous two years, if Dow Jones' survey is correct.

In the current season, Brazil's second corn crop is being harvested, and Argentina is nearing the end of its corn harvest. Analysts expect only slight reductions in corn crop estimates for both countries. Brazil is expected at 100.8 mmt (3.97 bb), and Argentina is expected at 49.9 mmt (1.96 bb).

SOYBEANS

USDA's June 30 planting estimate of 83.8 ma for soybeans was also lower than expected and will keep a lid on USDA's 2020 soybean crop estimate. Dow Jones' survey expects USDA to estimate a 4.167 bb soybean crop Friday, based on a slightly higher yield of 50.1 bpa.

Armed with USDA's 71% good-to-excellent soybean crop rating, it is understandable analysts are leaning toward a slight yield increase, but I suspect USDA will stay with the June estimate of 49.8 bpa for one more month, in order to wait for more evidence before making a change.

Analysts don't expect much change in the old-crop U.S. ending stocks estimate of 585 mb, but they do expect the new-crop estimate to increase from 395 mb to 443 mb, largely a result of the slightly higher crop estimate.

USDA's Grain Stocks report from June 30 also suggested Friday's adjustments will be small for soybeans. You may recall, USDA found 1.381 bb of U.S. soybeans on hand as of June 1, which was very close to expectations. One possible surprise in Friday's report would be another increase in the old-crop crush estimate of 10 mb or 15 mb.

With only small changes expected in USDA's estimates for U.S. soybean supplies, world totals are also expecting minor adjustments. Dow Jones' survey anticipates USDA to slightly increase its estimate of 2020-21 world soybean stocks from 96.3 mmt to 97.7 mmt, or 3.59 bb.

In the current 2019-20 season, analysts expect only a slight reduction in Brazil's soybean crop estimate, to 123.4 mmt (4.53 bb). There is room for a larger reduction as Brazil's crop agency, CONAB, estimated the soybean crop at 120.9 mmt (4.44 bb) on Wednesday. No change is expected in USDA's 50.0 mmt (1.84 bb) estimate for Argentina.

WHEAT

Wheat often doesn't get much attention in USDA's World Agricultural Supply and Demand Estimates (WASDE) reports, but the July report does offer its first estimates of U.S. ending stocks for the different wheat classes. Soft red winter (SRW) wheat supplies were famously tighter than usual in 2019-20 and should see some supply increase in 2020-21.

Dow Jones' survey expects USDA to lower its estimate of U.S. wheat production from 1.877 bb in June to 1.855 bb on Friday. Hard red winter (HRW) wheat production is expected at 732 mb, down from 833 mb a year ago. SRW wheat production is estimated at 291 mb, up from 239 mb a year ago. Analysts are anticipating a small decline for other spring wheat production, from 562 mb last year to 548 mb in 2020-21.

USDA's Grain Stocks report on June 30 pegged June 1 wheat stocks at a higher-than-expected 1.044 bb, and that is apt to stand as the final surplus of 2019-20. Analysts are looking for USDA to increase its estimate of U.S. ending wheat stocks from 925 mb to 959 mb for 2020-21, still not getting far away from the 1.0 bb mark wheat has exceeded for four consecutive years.

World wheat supplies have had a bearish effect on U.S. wheat prices for at least five years now, and Friday's estimates are not likely to be much different. USDA's crop estimates for other countries will offer some interest, though. Dow Jones' survey expects USDA to reduce its estimate of world ending wheat stocks from 316.1 mmt to 315.5 mmt, or 11.59 bb.

Crop estimate reductions are possible for the European Union, Ukraine and Russia, where dry weather has raised concerns. The return of a larger wheat crop in Australia, however, is apt to keep world production at a record-high level and serve as a brake on occasional wheat rallies.

Join DTN's July 10 webinar at noon CDT Friday to find out if USDA has any surprises this time around and what they will mean for grain prices. We're also glad to answer any market related questions you may have. Register now at: https://dtn.webex.com/…

U.S. PRODUCTION (Million Bushels) 2020-21
JulAvgHighLowJun2019-20
Corn 15,06015,29614,99415,99513,617
Soybeans 4,1674,3824,1334,1253,552
U.S. AVERAGE YIELD (Bushels Per Acre) 2020-21 (WASDE)
JulAvgHighLowJun2019-20
Corn 178.9181.0178.0178.5167.4
Soybeans 50.152.849.849.847.4
U.S. ENDING STOCKS (Million Bushels) 2019-20
JulAvgHighLowJun
Corn 2,2862,4032,2002,103
Soybeans 589635535585
Wheat 1,0421,0531,010983
U.S. ENDING STOCKS (Million Bushels) 2020-21
JulAverageHighLowJun
Corn 2,7823,0102,5253,323
Soybeans 443572355395
Wheat 9591,006875925
WORLD ENDING STOCKS (Million metric tons) 2019-20
JulAvgHighLowJun
Corn 315.7320.5311.8312.9
Soybeans 99.5101.098.099.2
Wheat 297.1298.0296.0295.8
WORLD ENDING STOCKS (million metric tons) 2020-21
JulAvg.HighLowJun
Corn 325.6340.0310.0337.9
Soybeans 97.7107.694.796.3
Wheat 315.5317.6311.8316.1
WORLD PRODUCTION (million metric tons) 2019-20
JulAvgHighLowJun2018-19
CORN
Argentina 49.950.049.050.051.0
Brazil 100.8103.099.0101.0101.0
SOYBEANS
Argentina 50.051.049.050.055.3
Brazil 123.4125.0122.0124.0119.0
U.S. PRODUCTION (million bushels) 2020-21
JulAvg.HighLowJun2019-20
All Wheat 1,8551,8851,8261,8771,920
Winter 1,2491,2851,2271,2661,304
HRW 732760710743833
SRW 291301269297239
White 225230219225232
Other Spring 548564529N/A562
Durum 596552N/A54

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

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Todd Hultman