December 13, 2018

Nov 2017 USDA Supply & Demand


US Ending Stocks (17/18 in million bushels)
USDA Oct 17 Avg Estimate USDA Nov 17
Corn 2,340 2,366 2,487
Soybeans 430 420 425
Wheat 960 957 935


Full Analysis:

Each month USDA updates various estimates of supply and demand and revises its moving target for where stocks will end at the end of the marketing year, August 31 for corn and soybeans and May 31 for wheat. The November report is where USDA gets a little more accurate with yield numbers. Yields are estimated from two separate data points, a direct farmer survey as well as independent in-field analysis. Today’s report was made from 8,727 direct farmer surveys (Oct 30 – Nov 6) and 4,952 field surveys (Oct 25 – Nov 1).

Corn: Old crop corn stocks, what was left as of August 31, were left unchanged on this report at 2.295 billion bushels. That was no surprise. The new crop stocks number was increased from 2.340 billion to now 2.487. That was well over the 2.366 trade estimate. The driver of today’s larger numbers was the increase in yields from 171.8 to 175.4 bpa. That was well over the 172.4 trade estimate. It would also represent a new record yield, surpassing last year’s 174.6. The increase from October comes to 2.1%. That is the largest Oct to Nov increase in 21 years. For those expecting a drop on the January summary report, don’t hold your breath. In years that USDA raised yields on the Nov report, the biggest drop they posted in January was 1.0%. At best, that drops yields down to 173.6. Despite much of the trade’s skepticism about this yield, even from Allendale, this big yield number is going to stay. With higher yields posted they raised the production estimate from 14.280 billion to 14.578. Due to this year’s lower acreage, this is still under last year’s 15.148 production record. However, with this year’s beginning stocks from the large old crop, total supply would run 16.922 billion, just under last year’s 16.942 record. With today’s 297 million bushel increase in production from October, USDA offset that with a 75 million bushel increase for feed/residual and a 75 million increase for exports. Ending stocks are not the best measurement of “tightness of supply”. For that we use ending stocks divided by usage. That number just jumped from 16.4% to now 17.2%.

World Numbers: New crop corn stocks were raised from 201.0 to 203.9 million tonnes. Aside from the higher US numbers, 2 million tonnes were lowered from the Former Soviet Union region. USDA did not touch the China corn production estimate at 215.0. That still needs to be cut 2 – 5 mt in future reports.

Price Expectations: USDA’s corn price forecast was left unchanged at $3.20 from last month. This is a cash corn estimate for Central Illinois that is weighted according to marketing patterns. Current bids in that location yesterday were at $3.17. If the 17.2% stocks to use estimate is correct, then nearby corn futures will fall to $3.30. We do look for better news on demand and 2018 acreage to show later on and support prices. For now, these numbers would suggest the focus is still on trying to find the fall low.

Soybeans: Old crop stocks were left unchanged from last month at 301 million bushels. New crop stocks were lowered from 430 to 425 million. That was near the 420 million trade estimate. A slight change in yield, still rounded up to 49.5 like last month, dropped production from 4.431 billion in October to 4.425. With this small change to production, USDA did not change any demand numbers. USDA’s numbers would imply a drop in stocks to use from 9.9% to 9.8%.

World Numbers: New crop stocks were raised from 96.1 million tonnes to 97.9. Lower US numbers were more than offset with an increase for Brazil’s crop to now a 108.0 from 107.0. This includes a revision higher for China’s soybean import number, from 95.0 to 97.0.

Price Expectations: USDA’s new crop price estimate for Central Illinois, weighted according to marketing patterns from September 1 – August 31, was raised by 10 cents to $9.30. Bids yesterday for that location were at $9.49. Current stocks to use numbers would imply $9.70 nearby futures.

Wheat: The old crop wheat marketing year ended on May 31. No changes were made to that category. The current crop ending stock estimate was lowered from 960 million to 935. The trade guess was 957. This came from a 25 million bushel increase for wheat exports. Some would suggest that was not needed.

World Numbers: World stocks were lowered from 268.1 to 267.5 million tonnes. The Russian crop was raised by 1 mt to now 83.0.

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