July 29, 2016

July 2016 USDA WASDE Report

July 7th, 2016
US Ending Stocks (15/16 in million bushels) - 07/12/2016
USDA June 16 Avg Estimate USDA July 16
Corn 1,708 1,804 1,701
Soybeans 370 346 350
US Ending Stocks (16/17 in million bushels)
USDA June 16 Avg Estimate USDA July 16
Corn  2,008 2,200 2,081
Soybeans 260 279 290
Wheat  1,050 1,106 1,105



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 July report incorporates the implied changes to old crop usage from the June 30 Grain Stocks report and acreage changes for new crop from the Planted Acreage report. They generally do not make changes new crop yields on this report.

July-16-WASDE-US-World-corn Corn: USDA left old crop stocks minimally changed at 1.701 billion bushels (1.708 in June). The trade was expecting an increase to 1.804 (ALDL 1.778). Going into this report the trade was expecting USDA to lower old crop demand to respect the June 30 Grain Stocks report. The real question was how well USDA handled the coming Brazil corn crop change and the implied changes for US exports. USDA cut Brazil’s corn crop down again by 7.5 million tonnes to now 70.0. Three months ago they were pegged at 84. This change led to a 75 million bushel increase for old crop US exports and a 100 million increase for new. This helped to offset the lower old demand implied from the Grain Stocks report. Feed/residual was lowered by 50 million for both old and new. Corn for ethanol was lowered by 25 million for old and new due to better corn to ethanol conversion rates in the recent quarter. For new crop supply USDA added 110 million bushels to production due to the new acreage numbers from June 30. No change was made to their 168.0 version of trend line yield. New crop stocks were raised from 2.008 billion to 2.081. The trade estimate was 2.205 (ALDL 2.218).

World Numbers: Old crop stocks were changed minimally, from 206.5 to 206.9 million tonnes. New crop was raised from 205.1 to 208.4.

Price Expectations: USDA’s price outlook for the September – August marketing year, via a cash corn price for Central Illinois, was lowered by 5 cents to now $3.65. Prices at that location were $3.31 yesterday. New crop pricing was lowered by 10 cents to now $3.40. Prices in that location were $3.28 yesterday. The early planted corn crop is doing great and set for above trend yields. The later planted crop will have a moderate problem given the current weather forecast. We could see a minor rebound in December corn to $3.80 in the next three weeks. Fall lows are expected $3.20 - $3.30.

July-16-WASDE-US-World-beansSoybeans: Old crop soybean stocks were lowered from 370 million bushels to now 350. The trade expectation was 346 (ALDL 379). The minor demand categories of seed and residual were lowered by 20 million reflecting the June 30 Grain Stocks report. Crush was left unchanged. Allendale argues USDA will have to lower it. We are behind in hitting USDA’s goal already and now we have a minimal 60 cent crush margin. Many grain analysts are still expecting an increase. Exports were raised by 35 million. A minor change to imports was also seen. On the new crop side production was raised due to higher acreage from the June 30 report. Yields were left unchanged at 46.7 as is normal. With higher crush and exports for new crop the jump in stocks was only a moderate 30 million to now 290. The trade was estimating 279 (ALDL 312). In the big picture, despite these neutral to slightly bearish numbers, compared with the trade guess, we are now past the report and focused on weather. 100 degree temps in portions of the WCB in late July cannot be ignored.

World Numbers: Brazil production was lowered by 0.5 to now 96.5. USDA still sees their spring 2017 production at 103. Argentina production was left unchanged at 56.5 for the wrapped up harvest and 57.0 for the spring 2017 picture. Old crop world bean stocks went from 72.3 to 72.2. New crop world stocks were raised from 66.3 to 67.1.

Price Expectations: USDA left their old crop cash price outlook for Central Illinois unchanged at $9.05. Current prices in that location were $10.62 yesterday. USDA sees new crop prices averaging $9.50 for the 2016/17 marketing year. The new crop bid yesterday was at $10.29 ½ in that location. With the current weather forecast we may have a chance at entering that gap at $11.20 on the November contract. Downside is limited to $10.25 for the fall lows at this time.

July-16-WASDE-US-World-wheatWheat: The old crop marketing year ended on May 31. The June 30 Grain Stocks report showed wheat stocks as of June 1. USDA made the small demand adjustment needed to get old crop stocks to that new number. On the new crop end the bigger acreage numbers and great harvest results made them increase production from 2.077 billion to 2.261. That was higher than the 2.172 trade estimate. The big jump was all from a better winter wheat harvest. This supply increase was partially offset with a 100 million increase in wheat for feed and 25 for exports due to cheap prices. New crop stocks were raised from 1.050 billion to 1.105. That was right on the trade estimate of 1.106 (ALDL 1.071).

World Numbers: World stocks were lowered from 257.8 to 253.7 million tonnes. This came despite a large 8 mt increase in production (Argentina, Australia, Canada, Russia). A good jump in feed usage was responsible.

Price Expectations: USDA lowered their price outlook by 20 cents to now $3.80. Current futures prices are now under our forecasted low. Pricing will likely be tied to corn a little more than normal due to wheat’s role as a substitute.

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