December 15, 2017

Oct 2017 USDA Supply & Demand Report

October 5th, 2017

Summary:

US Ending Stocks (17/18 in million bushels)
USDA Sept 17 Avg Estimate USDA Oct 17
Corn 2,335 2,289 2,340
Soybeans 475 447 430
Wheat 933 946 960

Recap:

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 October report is where USDA gets a little more accurate with yield numbers. Additionally, it is the first month with an acreage revision that comes from crop insurance data. 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 11,286 direct farmer surveys and 4,952 field surveys. These two surveys were conducted from September 26 – October 5.

Corn: Old crop corn stocks, what was left over as of August 31, were lowered from 2.350 billion to 2.295. That is of no surprise and comes from the 9/29 Grain Stocks report. New crop stocks were changed minimally, only a 5 million bushel increase to 2.340 billion. That was over the trade guess of 2.289. The starting point for the new crop balance sheet is planted acreage. That was lowered by 457,000 acres today to 90.429 million. New crop yields were raised from 169.9 to 171.8 bpa, a bit more than the 170.1 trade guess. Production was therefore raised by 132 million bushels to 14.280 billion. In the grand scheme of things, we still have a sharp cut in production this year from last year’s 15.148 billion record. We just have to whittle down the carry-in stocks over time. On the demand front, the only change USDA made was to raise feed/residual by 25 million.

World Numbers: New crop corn stocks were lowered from 202.5 to 201.0 million tonnes today. We are moving even further away from the completed bearish old crop world numbers at 227.0. For the balance sheet USDA raised Chinese domestic demand (corn for ethanol) by 2 mt. Allendale will point out they still need to cut new crop Chinese production. USDA is still at 215 mt for that figure. Just this morning the Chinese Ag Ministry lowered their guess to 210.1. Expect USDA to cut their estimate 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 $3.10 1/2.

Soybeans: Old crop stocks were lowered from 345 to 301 million bushels. That is of no surprise. It was shown by the 9/29 Grain Stocks report. New crop stocks were lowered from 475 million to 430. That was lower than the 447 trade expectation. New crop plantings were raised by 694,000 acres to now 90.207 million. That fits in with Allendale expectation. We suggest this was the minimum increase they could do based on crop insurance data. By January, expect another 400,000 – 500,000 acre increase. The surprise here was the drop in yields, from 49.9 to 49.5 bpa. Interestingly, higher acreage but lower yields left production exactly unchanged at 4.431 billion. No changes to demand were noted. Old crop ending stock changes were therefore carried directly to the new crop stocks.

World Numbers: New crop stocks were lowered from 97.5 million tonnes to 96.1. Few changes beyond a 1 mt increase for Chinese crushing were noted.

Price Expectations: USDA’s new crop price estimate for Central Illinois, weighted according to marketing patterns from September 1 – August 31, was left unchanged at $9.20. Bids yesterday for that location were at $9.22 1/2.

Wheat: The old crop wheat marketing year ended on May 31. No changes were made to that category. Current crop stocks were raised from 933 million bushels to 960. The trade guess was 946. USDA’s 9/29 Small Grains Summary report implied a 2 million bushel increase to production, now at 1.741 billion. The 9/29 Grain Stocks report, showing physical stocks as of September 1, implied weak demand from June through August. That resulted today in a 30 million bushel drop for feed/residual.

World Numbers: World stocks were raised from 263.1 to 268.1. Higher production was noted for India, FSU, Russia, EU, and Canada. Only a 1 million tonne drop was noted for Australian production (21.5 mt).

Price Expectations: USDA’s whole marketing year price expectation was left unchanged at $4.60. This is an average for the whole June 1, 2017 to May 31, 2018 old crop marketing year.

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