With U.S. corn in dough stage and soybeans setting pods, USDA will reveal the findings of its first farm surveys of 2018 and post new yield estimates for row crops. Traders will also be interested in changes in the world wheat crop estimates after dry weather concerns increased over the past month.
USDA will release its August Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CDT Friday, Aug. 10.
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Traditionally, the August WASDE report is not necessarily known for its predictive accuracy, as U.S. row crops are still developing. But the report is known for waking up traders from bad guesses after months of analyzing weekly crop ratings data. It seems there is just no good substitute for getting in the fields with a consistent survey procedure, and that is what USDA provides in August. Margins of error will still be high for corn and soybean crop estimates in this report, but August estimates often narrow the scope of where estimates go after Friday.
With Dow Jones’ survey of analysts as our guide for assessing market expectations, the average guess is that USDA will estimate a 14.417-billion-bushel U.S. corn crop Friday, up from the current guess of 14.230 bb. The estimated yield of 176.3 bushels per acre is just slightly below last year’s record of 176.6 bpa, and the range of guesses fell between 174 and 180 bpa. Knowing that December corn has responded to the August WASDE report with a double-digit price move in three of the past five years, it is fair to point out that Friday’s magic number from USDA could pop up outside of the estimated range.
Dow Jones’ survey also expects USDA to estimate new-crop U.S. ending corn stocks at 1.63 bb, a mild 78-million-bushel increase even though the corn crop estimate is expected to increase by 187 million bushels. The explanation for the difference likely has to do with the recent popularity of new-crop corn export sales, which are off to a strong start, currently up 61% from a year ago.
To understand the popularity of new-crop U.S. corn sales, we will want to see USDA’s world estimates, as well. According to Dow Jones, analysts expect USDA to estimate world ending corn stocks in 2018-19 at 152.2 million metric tons (5.99 bb), near last month’s estimate of 152.0 mmt. If true, that is down 21% from the previous year and should give corn prices a firmer base of support in 2018-19. There is also a chance we could see another reduction in Brazil’s 2017-18 corn crop estimate of 83.5 mmt (3.29 bb), as harvest is underway.
November soybeans have traded roughly 60 cents higher since the last WASDE report, helped by dry weather concerns as we got deeper into summer. In Friday’s report, USDA is expected to estimate a 4.428-bb U.S. soybean crop, based on a higher yield of 49.8 bpa. If true, that would be a new record-high U.S. soybean crop and the second-highest yield since 52.0 bpa was achieved in 2016. Soybean prices also have a history of volatile reactions to the August WASDE report. International FCStone estimated a yield of 51.5 bpa, so the U.S. yield record could still be challenged.
Dow Jones’ participating analysts expect USDA to increase its estimate of U.S. ending soybean stocks for 2018-19 from 580 mb to 641 mb on Friday. Similar to corn, new-crop export sales of U.S. soybeans are up 62% from a year ago, but where China may be involved, there is always a risk those early sales will later be cancelled. If we stick to Dow Jones’ estimates, however, U.S. ending soybean stocks could come in around 15% of annual use, which is the most since hitting 19% in 2006-07.
Any change to USDA’s world estimate of ending soybean stocks is likely to result from the U.S. production estimate, and in that regard, Dow Jones expects an increase in the world estimate, from 98.3 mmt to 99.3 mmt (3.91 bb). The wildcard in this market, of course, comes from the trade war with China — political policy decisions which could change unexpectedly at any time. As usual, we will move ahead with our best analysis, but the politics of a trade war with the world’s largest buyer of soybeans adds more uncertainty than usual to anyone’s market assessment.
The past several years, the August WASDE report has been all about corn and soybeans, while wheat comments could be summed up in one line: “There’s a lot of it.” For the first time since 2012, that will not be the case this year, as USDA is expected to reduce its estimate of world wheat production in August, supported by cuts in crop estimates for several major wheat-producing regions.
2018-19 world wheat production was estimated at 736.26 mmt (27.05 billion bushels) in July’s WASDE report, a 3% reduction from the previous year. On July 26, the International Grains Council estimated a 5% reduction in world wheat production, so a similar or even smaller estimate seems likely for USDA Friday as dry weather concerns have continued in several wheat areas.
Dow Jones expects USDA to reduce its estimate of world ending wheat stocks from 260.9 mmt to 255.6 mmt (9.39 bb) in 2018-19, over half of which is housed in non-exporting China. The other point we have been making about wheat recently is that ending wheat supplies of major exporters are expected to reach their lowest level in six years in 2018-19, so that update will also be of interest in Friday’s report.
Here in the U.S., USDA is expected to lower its estimate of ending stocks from 1.881 bb to 1.850 bb on Friday, a minor tweak. Winter wheat, other spring wheat and durum production are estimated at 1,181 mb, 600 mb and 74 mb, respectively.
As we get closer to this year’s row-crop harvest, Friday’s new estimates from USDA have the potential to spark unexpected moves in corn or soybean prices, but are also likely to confirm reasons for a higher price range in wheat in the year ahead.
|U.S. CROP PRODUCTION (Million Bushels) 2018-2019|
|U.S. AVERAGE YIELD (Bushels Per Acre) 2018-2019|
|U.S. ENDING STOCKS (Million Bushels) 2018-2019|
|U.S. ENDING STOCKS (Million Bushels) 2017-2018|
|WORLD ENDING STOCKS (Million metric tons) 2018-2019|
|WORLD ENDING STOCKS (Million metric tons) 2017-18|
|WORLD PRODUCTION (Million Metric Tons) 2017-2018|
|FSU – 12||121.24|