August 30, 2016

August 2016 USDA WASDE Report

August 11th, 2016

We are currently working on video & written commentary.

US Ending Stocks (15/16 in million bushels) - 08/12/2016
USDA July 16 Avg Estimate USDA August 16
Corn 1,701 1,716 1,706
Soybeans 350 320 255
US Ending Stocks (16/17 in million bushels)
USDA July 16 Avg Estimate USDA August 16
Corn 2,081 2,255 2,409
Soybeans 290 316 330
Wheat 1,105 1,114 1,100

Recap and 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. Old crop is changed due to expectations about usage in August and new crop is changed by USDA’s first survey based yield estimate.

USDA has a specific methodology with its yield estimates from August through October. There are two separate surveys that they use. The first, which comprises the vast bulk of their data, is a direct farmer survey. For this report they surveyed 22,100 producers between July 25 and August 8 over their corn, soybeans, wheat, and cotton estimates. The secondary survey is the objective survey, a small in-field effort. This objective survey is based on crop maturity. At the time of the USDA’s survey maturity likely limited the in-field analysis to plants per acre, ear counts, and a preliminary ear weight. The September and October reports will provide for more accurate information when more detailed analysis of the ear itself is made (kernel counts, kernel quality, etc).

The Allendale Nationwide Producer Survey will be conducted from August 15 – 26. Results will be out August 31.

August-16-WASDE-US-World-cornCorn: Old crop ending stocks were raised from 1.701 to 1.706 billion bushels. The trade was expecting 1.720. USDA raised old crop exports by a large 100 million and lowered feed/residual and corn for ethanol by 50. We agree with the corn for ethanol change due to big gains in the corn for ethanol conversion rate. Their export number is a possibility but will require a record August shipment pace. The sales are there but will we ship it out by August 31?

New crop is where the fireworks were seen. Yields were increased by 4.2% on this report to 175.1. That would be a new record yield and a new record production. The production number itself was raised by 613 million bushels. Even more impressive is the fact this new production number, at 15.153 billion bushels, is 1.552 over last year!

Allendale is a little skeptical of their yield number. It would be higher than our weather model suggested. It is also important to note that USDA’s August survey is only a partial survey. Once USDA gets back in the fields next month, we expect those discussions of uneven/incomplete pollination to lower their numbers. Another issue here is that very large 4.2% increase over July. In the four years (1995, 2000, 2008, 2009) where USDA made a large increase in August, yields were lower than that by the January report in three of them. We use a percentage increase rather than the change in bushels that most analysts use in this analysis. A 7 bushel increase is a bit different off this year’s 168 yield rather than 10 years ago at 149 or 20 years ago at 123.

It was also interesting to see USDA make little change to demand. When you change supply typically you get a demand response that offsets 30% - 70% of that change. The 125 million bushel increase to new crop exports only represented a 20% offset. While we disagree with USDA’s yield number, this part of their balance sheet is mostly right. Feed/residual gains will be limited by good supplies of competing products. Corn for ethanol gains may be limited by these gains in corn for ethanol conversion. New crop stocks were raised from 2.081 billion to now 2.409. The trade was expecting 2.261. USDA’s numbers would make a stocks to use measurement of 16.6%, the largest since the 2005/06 crop year’s 17.5%.

World Numbers: Minor changes were made to the old crop situation, stocks up from 208.4 million tonnes to 209.3. Due to the changes from the US, and minor changes elsewhere, new crop stocks were raised from 208.4 mt to 220.8.

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