The USDA World Agricultural Supply and Demand Estimates (WASDE) and Crop Productions reports were released on Thursday. The market viewed the reports bullishly. Thus, futures prices for corn, soybeans, and wheat all rose. Moreover, the rally continued into Friday morning. This article will detail the highlights from these reports and reactions from market analysts.
Estimated corn production dropped from September’s estimated 14.83 billion bushels to 14.8 billion as of October 1st. Additionally, estimated corn yield dropped month-over-month from 181.3 bu/ac to 180.7 bu/ac. Despite the drop, these estimates would be the largest average yield ever and the second largest number of bushels produced for a single growing season.
U.S. ending stocks moved higher to 1.813 billion bushels, typically a bearish signal. However, the market anticipated the estimate to be greater than 1.9 billion bushels. Thus, the lower than anticipated upward move was seen as bullish.
Estimated soybean production also dropped from September’s estimate of 4.693 billion bushels to 4.69 billion bushels. This modest decline came while the market was anticipating an increase. Thus, it was no a surprise to see soybean futures jump higher on the news.
Despite the slightly lower production number, the estimated average soybean yield ticked upward. The latest estimate is for yields of 53.1 bushels per acre, compared to the September estimate of 52.8 bpa. Consequentially, with production estimates down and yields up, the USDA revised the total number of harvested soybean acres downward by 600,000 acres to 88.3 million.
The estimate for ending U.S. wheat stocks rose from 935 million bushels in September to 956 million bushels. However, analysts had estimates a slightly larger increase. Moreover, estimated world ending stocks declined from 261.3 MMT to 260.18 MMT. This drop was greater than what analysts had expected.
Thus, wheat futures climbed on less supply than the market was anticipating.
Bryce Knorr of Farm Futures had these thoughts about the wheat estimates and overall market.
“USDA raised its estimate of wheat ending stocks as expected, but the agency didn’t adjust its forecast of exports. The very slow start to shipments in the first four months of the 2018 marketing year may be too big a deficit to overcome.”
Knorr continues to surmise that supplies may tighten as too much rain for seeding hard red winter wheat on the Southern Plains may be wheat’s best hopes for breaking out of its recent stalemate.
Todd Hultman of DTN/PF reiterated the sentiment many grain analysts had about the report. Specifically, there was widespread concern that already big crops might get bigger. For example, ahead of the report Todd Hubbs, an Ag Econ professor at the University of Illinois was focused on how much bigger the production estimates would increase. You can listen to a Brownfield Ag News interview of Todd Hubbs here.
However, the USDA reports eased those fears. Hultman noted that the corn yield estimate dropped. Furthermore, despite the corn price uptick, there was nothing specifically bullish in Thursday’s estimates.
He reminds readers that
1.81 bb of U.S. ending stocks is still a comfortable supply of U.S. corn. However, after several months of anticipating a large corn crop, Thursday’s crop estimate looks unlikely to get bigger, noting lower yield estimates in Iowa, Illinois and Nebraska.
Analysts agree that trade with China, or the lack thereof, remains the dominate market factor. Knorr notes that the top concern for the soybean market heading into 2019 is the trade dispute with China. China is typically the largest buyer of U.S. soybeans. Knorr notes additional possible bright spots.
“Low-priced U.S. soybeans are a bargain that end-users around the world won’t want to pass up, especially if any weather problems show up over the next few months in South America. It’s early, but parts of Argentina are starting to trend drier, and eastern Brazil is also lacking moisture for planting.”
Kevin Van Trump of Corn and Soybean Digest is encouraging producers to trim their risk exposure as soybean prices rally.
Van Trump highlights the soybean market could have taken a hit as a results of the higher estimated average yields. However, the reduction of harvest acres lowered the estimated production. Like Knorr, he too is keeping a watchful eye on the U.S. China trade dispute. Clearly an optimist, he is hopeful a resolution can be reached sooner rather than later. Read Ag Nook’s related story about the likelihood of a quick resolution, “Will China Back Off on Soybeans?“.
More Upside Potential
Recent rains during harvest could play a factor in shaping November’s USDA numbers. These reports were through October 1st. As many growers know the wet weather has been a major factor impacting harvest across the corn belt. It is possible that USDA production numbers dip as a result of these recent conditions.
Read Ag Nook’s story; “Lingering Rain Stalls Harvest“.
The October USDA WASDE and Crop Production reports were bullish for corn, soybeans, and wheat. The futures prices of all three rose on estimated production being less than what grain market analysts anticipated. However, despite the near-term price increase, the USDA continues to estimate a record breaking grain production season.