August 20, 2018

August 2018 USDA WASDE Report

August 10th, 2018

Summary:

US Ending Stocks (17/18 in million bushels)
USDA July 18 Avg Estimate USDA Aug 18
Corn 2,027 2,021 2,027
Soybeans 465 460 430
Ending Stocks (18/19 in million bushels)
Corn 1,552 1,636 1,684
Soybeans 580 638 785
Wheat 985 961 935

 

Corn: Old crop stocks were left unchanged at 2.027 billion bushels. New crop stocks were raised from 1.552 billion to now 1.684. That was only slightly over the 1.636 trade expectation for this report. With no change to the old crop numbers, USDA started the new crop balance sheet by raising yields from 174.0 trend to now 178.4. That would be over last year’s record 176.6. Production, at 14.586 billion, would be 356 million over last month. Much of this larger supply was offset by larger demand. Feed/residual was increased by 100 million and new crop exports were raised by 125 million to 2.350 billion. That new crop export would be just under their current year 2.400 estimate. In the grand scheme of things, domestic corn supplies are relatively tight. The current 11.2% stocks to use estimate is the smallest in five years.

World Numbers: Minimal changes were noted for old crop world stocks. New crop numbers were raised from 152.0 to 155.5 million tonnes. Declines from last month were noted for Brazil (-1.5), South Africa (-0.5), and the EU (-1.7). That was partially offset with increases from the Eastern Europe. World corn stocks to use, using USDA’s numbers, comes to 14.1%. That is the tightest since 1973.

Price Expectations: USDA lowered their new crop price estimate by 20 cents this month to a $3.60 midpoint. The range is from $3.10 - $4.10. This is a cash corn price estimate for a central Illinois location. New crop bids yesterday in that location were at $3.49 1/2. Allendale computes that level would imply December corn at $4.65 if we did not have an artificial overhang from the threat of corn tariffs from Mexico.

Soybeans: Old crop stocks were lowered from 465 million bushels to 430 today. New crop was raised sharply, from 580 million to now 785. This was far over the 638 million average guess. It was even over the 726 highest analyst guess. USDA’s old crop numbers were tightened due to slightly higher crush and export estimates. On the new crop end yields were raised from 48.5 bpa trend up to 51.6. This was the largest July to August yield increase in history for both the bushel change (+3.1 bpa) and percentage change (+6.4). That is just under the record 52.0 posted for the 2016 crop. In USDA’s numbers today, the soybean yield guess may be considered a little high. Production, at 4.586 billion, would be 276 million higher than last year. Different than corn, there was only a minimal offset with higher demand. Domestic crush was raised by 25 million and exports were raised by 20. USDA’s new crop export guess, at 2.060, is still under the current year’s 2.110. We would suspect most in the private trade have a little larger export guess. The 785 million ending stock guess is easily a new record. Stocks to use, the measurement that determines price, was raised to now 18.5%. That is slightly under the 18.6% peak from 2006/07. There are many years up until 1986/87 that had bigger numbers but you could say this is the second largest soybean supply in over 30 years.

World Numbers: World old crop stocks were raised from 98.3 to 106.0 mt. A larger US crop was the key issue. No changes to non-US production was noted. New crop numbers for Argentina and Brazil were unchanged. For China, USDA lowered their old crop import guess down from 97 mt to 96. For new crop, they lowered domestic crush by 1.5 mt. World soybean stocks to use comes to 30.0%. That would be an all-time record, slightly over the 29.4% posted two years ago.

Price Expectations: The 2018/19 price expectation was lowered by 35 cents to a $7.65 – $10.15 range. Current new crop bids in that location are at $8.66 1/2. USDA’s domestic stocks to use estimate would imply $7.85 for November soybeans. Many would suggest USDA’s soybean yield estimates are a little large. Don’t be surprised if support comes in at prices over that level.

Wheat: No change was made to the completed old crop year that ended on May 31. Stocks were left at 1.100 billion. New crop was lowered from 985 million to 935. The trade guess was 961. Production for the 2018 crop was lowered from 1.881 billion to 1.877. The minimal decline came from lower winter wheat and durum numbers. Interestingly, USDA was active in raising new crop demand numbers. Food was raised by 5 million while feed/residual was lowered by 10. Perhaps the biggest surprise on the report came on the export numbers. A 50 million bushel increase was noted to offset the good declines in non-US production posted on this report. The problem is that we were far behind the pace needed to hit USDA’s previous goal. New crop wheat export sales are at nine year lows. They only come to 28% of USDA’s July goal. That is sharply under the 44% five year average pace by this point. The 43.0% US stocks to use is the tightest supply in four years. Many will question that export number though.

World Numbers: New crop stocks were lowered from 260.9 to 259.0. This is still down from last year’s 273.1. Sharp declines were noted for non-US producers. The EU crop was hit by 7.5 mt to now 137.5. That is down from last year’s 151.7. Minor increases were noted for Pakistan, Russia, and Kazakhstan. Stocks to use, at 34.8%, is the tightest in two years. We are still on the higher end of supply for the past 30 years.

Price Expectations: USDA’s whole marketing year price expectation was raised 10 cents to $4.60 - $5.60. for new crop. Allendale suggests that the exciting production declines in non-US areas has added good support. However, the lack of corresponding increase in US demand is a clear concern. We are treating this as a supply restricted rally that does not have backing by world buyers chasing product. We see a move down to $5.25.


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