USDA Reports Preview
Traders Anticipate Lower Row-Crop Supplies
After finding less corn and soybean stocks on Sept. 1 than expected, USDA will present new balance sheets for 2020-21 on Friday, including updates of crop estimates and export estimates.
USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CDT Friday, Oct. 9.
CORN
A short six months ago, grain markets were in the clutches of a global pandemic with many of us wondering how demand would go for this year's crops. Now, in early October, the scenario has changed dramatically, as earlier talk of a 3-billion-bushel (bb) corn surplus is now expected to be closer to 2 bb in Friday's WASDE report. Coronavirus is still with us, threatening health and economic vitality, but demand for corn and soybeans has turned surprisingly strong in the second half of 2020.
According to Dow Jones' survey of analysts, USDA is expected to lower its estimate of U.S. ending corn stocks from 2.503 bb to 2.130 bb for 2020-21, a less bearish burden on prices. Corn harvest is starting with warm and dry conditions this year, much more favorable for timely progress. Dow Jones expects USDA to estimate the corn crop at 14.801 bb, based on a slightly lower yield of 177.6 bushels per acre (bpa).
Overall, the survey estimates are reasonable, but may be a shade too bullish. I don't have a major disagreement but expect USDA to estimate 2.20 bb of ending corn stocks.
Corn exports are off to a strong start in 2020-21 with 988 million bushels (mb) already on the books, up 154% from a year ago at this time. Nearly 40% of the sales have been to China, which is not a typical customer for U.S. corn until this year. In China, 2020 started with the rapid spread of COVID-19; the country encountered serious summer flooding and is now facing high domestic food prices, scrambling to secure food supplies.
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Worldwide, Dow Jones' survey expects USDA to lower its estimate of 2020-21 world ending corn stocks from 306.8 million metric tons (mmt) to 299.7 mmt or 11.8 bb. Ending corn stocks for the world's top four exporters in 2020-21 are currently estimated at 3.0 bb and are likely to come down as the U.S. represents the largest share of those supplies.
SOYBEANS
While the outlook for corn prices has undergone dramatic bullish improvement the last few months, the change in the outlook for soybean prices has turned even more bullish, and there is a chance world soybean supplies could become dangerously tight in 2020-21.
For Friday's WASDE report, Dow Jones' survey expects USDA to lower its estimate of U.S. ending soybean stocks for 2020-21 from 460 mb to 360 mb. If true, it would be the lowest U.S. ending soybean stocks in four years. Because we don't know yet how much more China intends to buy, there is a chance of supplies getting even tighter.
Of all the estimates in Friday's WASDE report, USDA's assessment of U.S. ending soybean stocks is the least certain, given the current situation. Not only is China's demand surprisingly strong and still unknown, but much will also depend on South America's crop weather, with extremely bullish consequences possible for any adversity in 2021.
USDA's U.S. soybean crop estimate is expected to drop a little Friday, from 4.313 bb in September to 4.292 bb based on a slightly lower yield estimate of 51.7 bpa. Harvest anecdotes have been mixed this fall, but there is also a chance of a slightly higher crop estimate.
The export estimate is the most interesting factor on the soybean spreadsheet as export commitments already total 1.46 bb for 2020-21, the most on record for this time of year with over half spoken for by China. Supplies are currently depleted in Brazil and won't start to be replenished until February 2021.
USDA's world estimate of 2020-21 soybean stocks is expecting a small reduction Friday, from 93.6 mmt in September to 90.9 mmt or 3.34 bb. Keep in mind, USDA's world estimates are midseason totals for South America. USDA's ending stocks estimates for Brazil and Argentina in their current seasons are currently much tighter, at a total of 445 mb for the two countries.
WHEAT
For wheat, Dow Jones' survey expects a small reduction in the 2020-21 estimate of U.S. ending wheat stocks, from 925 mb in September to 889 mb on Friday. USDA's report of 2.159 bb of Sept. 1 wheat stocks was close to expectations last week, but the production estimates for hard red winter (HRW) and soft red winter (SRW) wheat both came in less than expected. For that reason, we will be watching for small reductions in USDA's ending stocks estimate of 385 mb for HRW wheat and 108 mb for SRW wheat.
Winter wheat prices have been trading higher lately, based on concerns about dry weather hurting winter wheat production in 2021. Friday's WASDE report won't have much to say about that. Dow Jones' survey expects USDA to lower its estimate of 2020-21 world ending wheat stocks from 319.4 mmt to 316.9 mmt, but the reduction is difficult to explain as it is late in the season and USDA has yet to budge from its prediction of another record world wheat crop.
If there is one thing we can say about 2020, it is that markets don't always go as expected, and there may be another surprise waiting. Join us at noon CDT on Friday, Oct. 9, as we examine USDA's latest estimates and what they mean for grain prices. I'll also be glad to answer any questions you may have.
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| U.S. PRODUCTION (Million Bushels) 2020-21 | ||||||
| Oct | Avg | High | Low | Sep | 2019-20 | |
| Corn | 14,801 | 14,963 | 14,638 | 14,900 | 13,617 | |
| Soybeans | 4,292 | 4,358 | 4,249 | 4,313 | 3,552 | |
| U.S. AVERAGE YIELD (Bushels Per Acre) 2020-21 (WASDE) | ||||||
| Oct | Avg | High | Low | Sep | 2019-20 | |
| Corn | 177.6 | 179.2 | 175.4 | 178.5 | 167.4 | |
| Soybeans | 51.7 | 52.5 | 51.2 | 51.9 | 47.4 | |
| U.S. HARVESTED ACRES (Million Acres) 2020-21 | ||||||
| Oct | Avg | High | Low | Sep | 2019-20 | |
| Corn | 83.3 | 83.5 | 82.7 | 83.5 | 81.3 | |
| Soybeans | 82.9 | 83.0 | 82.5 | 83.0 | 75.0 | |
| U.S. ENDING STOCKS (Million Bushels) 2020-21 | ||||||
| Oct | Average | High | Low | Sep | ||
| Corn | 2,130 | 2,333 | 1,882 | 2,503 | ||
| Soybeans | 360 | 436 | 285 | 460 | ||
| Wheat | 889 | 915 | 835 | 925 | ||
| WORLD ENDING STOCKS (million metric tons) 2020-21 | ||||||
| Oct | Avg. | High | Low | Sep | ||
| Corn | 299.7 | 305.0 | 295.5 | 306.8 | ||
| Soybeans | 90.9 | 93.1 | 88.1 | 93.6 | ||
| Wheat | 316.9 | 319.0 | 310.9 | 319.4 | ||
Todd Hultman can be reached at todd.hultman@dtn.com
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