More Bearish News From USDA?

The 2019 U.S. crop season continues to be unlike any other in recent history, which means that surprises may still be waiting before harvest is finished. For Thursday’s September World Agricultural Supply and Demand Estimates (WASDE) report, however, USDA’s crop estimates for corn and soybeans are apt to only see minor changes as the consequences of late-planted crops have yet to be determined.

CORN

USDA’s corn crop estimate in August came in at a higher-than-expected 13.9 billion bushels (bb) with a yield estimate of 169.5 bushels per acre (bpa). Thursday’s report will be the first time this season that USDA sees actual field data, so there is some potential for a surprise in yield. However, the analysts in Dow Jones’ survey only expect a modest reduction, providing an average yield estimate of 166.7 bpa and a crop estimate of 13.61 bb.

Even Gro Intelligence, the firm that estimated corn yield near 163 bpa roughly a month ago for the DTN/Progressive Farmer 2019 Digital Yield Tour has updated its national corn yield estimate to 170 bpa as of Sunday, Sept. 8, finding recent improvement in crop conditions.

For U.S. ending corn stocks, Dow Jones’s survey expects 2.4 bb for 2018-19 and 1.965 bb for 2019-20. The old-crop estimate is reasonable as corn exports failed to reach USDA’s export estimate of 2.100 bb by the end of 2018-19. The modestly lower new-crop estimate is reasonable, but given USDA’s recent record of optimism concerning the 2019 crop, we also can’t rule out the bearish possibility of an unchanged or higher corn crop estimate Thursday.

Just as Dow Jones’ survey is expecting a modestly lower estimate of U.S. ending stocks, the same analysts are also expecting USDA’s estimate of world ending corn stocks to be reduced from 307.7 million metric tons (mmt) to 301.8 mmt (11.88 bb) for 2019-20. The lower estimate is not necessarily unreasonable, but it does seem optimistic given USDA’s view of the U.S. corn crop to date.

Tuesday’s higher corn prices were likely related to the slow pace of denting in 2019 and may have been related to unexpected trade optimism with China. Prices may have also been helped by nervous shorts covering ahead of Thursday’s report.

The important point for corn is not to get caught up in guessing what USDA will say Thursday, but to recognize that a significant percentage of this year’s crop is going to have trouble maturing in time, especially in the northern states. That problem may not be recognized by USDA until January, but it is likely to play a part in the latter stage of the harvest season.

SOYBEANS

USDA’s soybean crop estimate of 3.68 bb in August is already 864 million bushels (mb) less than a year ago, but there is room for that estimate to go even lower based on yield. Dow Jones’ analyst survey expects USDA to lower its soybean yield estimate from 48.5 bpa to 47.2 bpa, reducing the crop estimate to just under 3.60 bb.

Forty-seven bushels per acre is also close to the latest estimate from Gro Intelligence, as reported in Monday’s DTN webinar, and is also in line with numerous anecdotal reports I’ve heard from Illinois farmers who told us the pod counts just weren’t as high as usual.

With the lack of Chinese purchases still hanging over U.S. soybean prices, this year’s smaller soybean crop has provided temporary relief from an extremely bearish situation in soybeans this summer. Dow Jones’ survey expects USDA to estimate U.S. ending soybean stocks at a record high 1.04 bb in 2018-19 and at a lower 661 mb in 2019-20.

To USDA’s credit, the lower ending soybean stocks estimate of 661 mb in 2019-20 has a reasonable demand estimate, which reflects the current reality of minimal trade from China. While 661 mb of soybeans is still historically high and bearish for current prices, I have to mention that the possibility of a trade resolution with China (however unlikely it may currently look) remains a bullish possibility to monitor in the months ahead.

As far as USDA’s estimate of world soybean stocks, Dow Jones’ survey expects to see only a slight drop from 101.7 mmt to 101.6 mmt (3.73 bb). Along with the world stocks estimate, we will be watching to see if USDA reduces its estimate of China’s soybean imports, based on a recent report from USDA’s attache in Beijing. Currently set at 85.0 mmt in 2019-20, the attache recommended a reduction to 80.0 mmt or 2.94 bb, related to the impact of African swine fever.

WHEAT

As usual for wheat in the September WASDE report, any adjustments from USDA are likely to be minor and are unlikely to offer much change in direction for wheat prices. Dow Jones’ survey expects USDA to keep its estimate of U.S. ending wheat stocks unchanged at 1.014 bb.

World crop estimates will be interesting, and a reduction may be on the way for Australia’s wheat crop. Dow Jones’ survey expects world ending wheat stocks to increase slightly, from 285.4 mmt to a new record high of 285.5 mmt (10.49 bb) in 2019-20.

Monday, Sept. 30, will be the next grain report of interest from USDA and will include a Small Grains Summary, as well as an update of Sept. 1 Grain Stocks.

This continues to be a year with no easy comparison for row crops, and that remains a challenge for USDA and private analysts alike. Because Thursday’s WASDE report includes field data for the first time, USDA’s yield estimates should help narrow the range of crop size guesses.

The number of harvested corn acres remains a mystery yet to be solved and probably won’t be reasonably known in September or October.

Source: Todd Hultman, DTN