On Thursday, June 10, at 11 a.m. CDT, USDA will release its latest supply and demand estimates, but the market may not notice. Concerns about hot and dry weather in the U.S. western and Northern Plains are already limiting production potential in 2021 faster than USDA estimates can keep up.
You may recall the last time we gathered for a World Agricultural Supply and Demand Estimates (WASDE) report, USDA estimated a 14.99 billion-bushel (bb) corn crop, based on a suspiciously low 91.1 million acre planting estimate and a suspiciously high yield estimate of 179.5 bushels per acre (bpa). The national yield record for corn is 176.6 bpa, reached in 2017. The profile of subsoil moisture across the Midwest in June 2021, however, is much drier than it looked at this time in 2017.
The market is correct to be concerned about this year's production potential for corn and soybeans, but we won't get much insight about that in Thursday's WASDE report. Traditionally in June, USDA leaves the production estimates for corn and soybeans at or near the same levels from the May report, as it is too early to have much convincing evidence.
The Dow Jones pre-report survey of analysts expects a slightly higher corn-crop estimate of 15.018 bb Thursday, based on the same 179.5 bpa yield. Old-crop U.S. ending corn stocks are expected to be reduced 52 million bushels (mb) to 1.205 bb. New-crop ending corn stocks are expected to come down 93 mb to 1.414 bb.
One factor helping to reduce ending corn supplies is the recent increase in ethanol production, now seen above 1 million barrels per day the last three weeks, as driving activity and the U.S. economy show signs of picking up. Corn's export estimate is also likely to be raised as old-crop sales on the books are within 54 mb of USDA's 2.775 bb export estimate.
Large, early new-crop corn purchases from China and drought in Brazil are also possible contributors to higher U.S. corn export estimates Thursday.
Private analysts have estimated Brazil's corn production near 90.0 million metric tons (mmt) to 95.0 mmt, allowing plenty of room for USDA to cut its current estimate from 102.0 mmt.
For 2020-21, Dow Jones' survey expects USDA to reduce its estimate of world ending corn stocks from 283.53 mmt to 280.10 mmt, factoring in some crop loss for Brazil. The survey estimates for corn are reasonable but, if correct, probably won't have much price impact. Traders are more interested in the next forecast and what USDA will say in the Acreage and Grain Stocks reports on June 30.
As with corn, Dow Jones' survey does not expect much change in USDA's soybean production estimate, anticipating a 9 mb increase to 4.414 bb, while using the same May yield of 50.8 bpa. The yield estimate is optimistic, given the crop's dry early start, but it is less than the national record of 52.0 bpa from 2016.
USDA has kept its estimate of U.S. old-crop ending soybean stocks unchanged at 120 mb for four straight months and we shouldn't be surprised if Thursday becomes five in a row. USDA has reported 2.26 bb of U.S. soybeans sold in 2020-21 and only needs another 20 mb to hit its export estimate, but business has fallen off since February.
Crush activity has also slowed for soybeans since February and, judging by the drop in soybean meal prices, it appears meal supplies are adequate for summer. The most bearish surprise of late has been a 33-cent drop in DTN's national soybean basis since the end of April. We won't have a report on June 1 soybean stocks until June 30, but given the clues, it is possible old-crop soybean supplies will be adequate this summer.
For 2021-22, Dow Jones' survey expects USDA to slightly reduce the current 140 mb ending stocks estimate to 139 mb. With little known about the new season yet, there may not be any changes other than what flow through from old-crop adjustments.
USDA's estimate of world soybean stocks for 2020-21 is expected by Dow Jones to increase slightly, from 86.55 mmt to 86.70 mmt. USDA's crop estimate for Brazil may be tweaked but will likely stay near its current 136.0 mmt.
On Monday, USDA said 2% of the winter wheat crop was harvested and 85% was headed. It won't be long before the new 2021 winter wheat crop will be moving into commercial channels. Dow Jones' survey expects USDA to increase its wheat production estimate for 2021 from 1.872 bb to 1.890 bb, and USDA's ending U.S. wheat stocks estimate to increase from 774 mb to 777 mb.
Old-crop export sales have been a little light at the end of 2020-21, so there may actually be a bump up in ending stocks, but not by a significant amount. USDA's NASS will have winter wheat production estimates in Thursday's Crop Production report. Dow Jones expects 1.306 bb of winter wheat, up from 1.171 bb in 2020-21. Hard red winter (HRW) wheat production is estimated at 757 mb, up from 659 mb a year ago.
With a new season underway, USDA's estimate of 2021-22 world ending wheat stocks will get attention and is expected to be increased slightly, from 294.96 mmt in May to 295.20 mmt in June. Crop conditions have been favorable in Europe, Ukraine and southern Russia and may show higher production estimates than a month ago.
Expectations for a market-moving surprise in Thursday's WASDE and Crop Production reports are low, but always possible. The likely scenario is that traders will pause at 11 a.m. CDT, note a lot of small changes in USDA's estimates, and then go back to trading weather.
Join DTN's webinar at noon CDT Thursday, June 10, as we go over USDA's latest estimates and what they mean for grain prices. We're also glad to answer any questions and provide a rebroadcast link for your convenience. Register here for Thursday's WASDE report webinar: https://ag.dtn.com/…
|U.S. PRODUCTION (million bushels) 2021-22|
|U.S. ENDING STOCKS (Million Bushels) 2020-21|
|U.S. ENDING STOCKS (Million Bushels) 2021-22|
|WORLD ENDING STOCKS (Million metric tons) 2020-21|
|WORLD ENDING STOCKS (million metric tons) 2021-22|
|WORLD PRODUCTION (million metric tons) 2020-21|
Todd Hultman can be reached at email@example.com
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