Traders liked what they saw in the latest World Agricultural Supply and Demand Estimates (WASDE) report released Monday from USDA.
While the agency left things like yield untouched, it did make revisions to both old and new crop stocks of corn, which included:
- The agency reporting there is still more than 1 billion bushels in the bin, 25 million lower than June
- Forecasting for 1.4 billion bushels of new crop.
It says the outlook is for larger supplies, greater feed and residual usage along with increased exports.
As for soybeans, there were minor revisions, which included:
- 135 million bushels is the current supply, unchanged from last month
- Forecasting another 155 million still to come, also the same from June.
No Change in Yield
USDA’s July WASDE report showed yield forecasts unchanged for both corn and soybeans, a move that was expected for the July report.
“USDA did not change the yield numbers for corn or soybeans, and they typically do not in recent years change the yield numbers for those crops in July,” says Joe Vaclavik of Standard Grain. “So, it should not be a surprise at all that we saw no change here in regard to the corn and soybean yield numbers. Now, I believe that you will see changes to those numbers in August. Once USDA has a little bit better feel for what’s out there, they’ll use the crop ratings, they’ll use their normal methodology. So that’s the first thing. There was a surprise here and the surprise was in the spring wheat. USDA projected other spring wheat production at three hundred and forty five million bushels, which was way below trade expectations. It would be down more than 40% versus last year. So, this speaks to the dire drought stricken areas of the Northern Plains.”
The headline of the report seemed to be wheat, where USDA made major cuts. USDA now expects the all-wheat yield to be 45.8 bushels per acre, down nearly 5 bushels per acre from last month.
USDA says the production forecasts for durum and other spring wheat show a significant drop this year due to severe drought conditions in the Northern Plains. USDA’s WASDE report showed:
- Durum wheat production down 46%
- Old crop stocks at 844 million bushels.
- New projected ending stocks cut 105 million bushels to 665 million, the lowest since 20-13.
“The other thing that kind of concerns me is if spring wheat in those areas is in this bad shape and it’s that much worse than the trade had expected, what does that mean for corn and soybean crops up in some of those same areas? You know, we’ve seen big acreage expansion of both crops in the Dakotas and some of these same areas. So, it probably doesn’t bode well for USDA’s corn production numbers in, say, North Dakota down the road,” adds Vaclavik.
Corn and Soybeans in Brazil
Looking at the Brazilian crops, which have been under weather pressure as of late, USDA cut the country’s corn crop production by 5.5 million metric tons to 93 million metric tons. Argentina, however, seeing a 1.5 million metric ton increase.
As for soybeans, Brazil is unchanged from the June report. Argentina was adjusted slightly lower.
“Some of the other big things that we always look for at this time of the year is we’re looking to see what that South American crop does,” says Ben Brown, an agricultural economist at the University of Missouri. “USDA lowered Brazil corn production down another 5.5 million metric tons. That brings them down to 93 million metric tons. Many private analysts are still below 90 million metric tons for that Brazil crop.”
Brown says the other thing of note was USDA’s revisions to the export side of Brazil’s balance sheet.
“They also lower Brazilian exports now, given where they lowered it 5 million metric tons, which given where they’re at on production,I just don’t see how we’re not going to have to lower that export number again in future months for Brazil. And that’ll have to be made up in other countries. And that was probably interesting to watch that we didn’t see as bigger revisions in world trade as what we probably should have seen given the reduction in Brazil production.”
Read more insight from the USDA’s recent report here.
