Friendly USDA Report Heightens A Proactive Marketing Plan
Was USDA’s June World Agricultural Supply and Demand Estimates bearish or bullish?
“It’s friendly because it wasn’t more bearish,” says Alan Brugler, president of Brugler Marketing & Management.
“In the grand scheme of things, this is a neutral report,” adds Joe Vaclavik, owner of Standard Grain. “There was nothing really surprising at all – you can just look at the market as an indication. We didn’t see much price reaction at all.”
USDA reports little change in the 2020/21 U.S. corn outlook, with fractional increases to beginning and ending stocks. Beginning stocks are raised, as a 45-million-bushel reduction in estimated production for 2019/20 is largely offset by a 50-million-bushel reduction in projected corn used for ethanol.
“We knew they would cut ethanol production, since we’re still down 24% on weekly ethanol production,” Brugler says.
“The ethanol situation is improving, but still pretty dire overall,” Vaclavik adds. “We have a lot of work to do there. Ethanol is still an enormous problem for the corn market.”
USDA held the season-average corn farm price at $3.20 per bushel.
The soybean outlook for 2020/21 includes higher beginning stocks, higher crush and slightly lower ending stocks. Beginning stocks are raised 5 million bushels with higher crush for 2019/20 more-than-offset with lower production and a lower export forecast.
USDA held the season-average soybean price at $8.20 per bushel.
The most bearish information in the report was for wheat, Brugler says.
U.S. 2020/21 wheat supplies are up on a larger crop and a slight increase in beginning stocks. Winter wheat production is forecast up 11 million bushels to 1,266 million. Total 2020/21 wheat production is now forecast at 1,877 million bushels, and total supplies are raised 16 million to 3,000 million.
“They raised the winter wheat production when everybody thought they were going to lower it,” he says.
From a global outlook, Brugler says farmers need to keep an eye on South American production.
“This report does reinforce South America has a lot of production,” he says. “USDA did not lower Brazilian production numbers. There are still quite a bit of beans and corn down there that will have to compete with us in the export market.”
USDA reduced U.S. soybean exports by 25 million bushels on increased competition from South America. For 2019/20, soybean exports are increased 1 million tons each for Argentina and Brazil, based on the recent pace of shipments and reflect increased crush demand and imports for China.
Looking forward, Brugler says the market focus will shift to the June 30 Grain Stocks and Acreage report.
“USDA was not expected to change acreage numbers today because they almost always wait until the June Acreage report,” he says. “We tend to think there are more bean acres and less corn acres than what we saw in the March Prospective Plantings report. On June 30, we’ll find out if we got that shift.”
Of course, Mother Nature could still steal the show.
“Weather will be the biggest driver in the grain markets this time of year,” Vaclavik says. “Do we have a weather threat right now? Not really. The first week three weeks of July is that important pollination window that makes or breaks the crop. That’s what the market will be most interested in moving forward.”
Time to Be Proactive
As of June 8, USDA reports 75% of the U.S. corn crop has a good or excellent condition rating. For soybeans, 72% of the U.S. crop received the two highest ratings.
“Farmers have to realize if new crop conditions stay relatively good, then yield will be above trendline,” Brugler says. “Then they need to be a little more aggressive on old-crop sales than they want to be – there’s a hammer coming; get out of the way before it hits.”
The grain markets will still likely rally at some point, Brugler says. “But you need to be proactive selling into the rallies.”
Read More
WASDE: Corn Beginning and Ending Stocks Up Slightly
What to Watch for in the June WASDE Report
Corn, Soybeans and Spring Wheat Show High Crop-Condition Scores
