High corn exports highlight recent USDA report
By KRISS NELSON
The most recent World Agricultural Supply and Demand estimates were released last Thursday showing corn exports are higher than where they were a year ago at this time.
DTN market analyst, Todd Hultman said the recent USDA numbers may find a little distance from reality, but the jury is still out and only time will tell how things will pan out in the new future.
“Where we are in the scheme of things, as USDA reports go, for estimating crop sizes, the October report has had a pretty good tradition of being a much more accurate report,” he said. “But we still have a lot of risk in the fields, we could actually see today’s estimates being off more than five percent.
“In traditional terms, the October report has usually been a fairly decent estimate of how things go, but we don’t usually have flooded fields and snow in the fields this time of year either. This year it not over by any means yet. We are still estimating damage that is out there.”
U.S. ending stocks for the Oct. 11 report for corn came in at 1.814 billion bushels (bb) which was up, Hultman said, from last month’s report of 1.77 bb.
Although that is an increase, Hultman said it is still under than what was expected.
“If you recall we had a September 28 grain stocks report and in that report we knew there was going to be more corn bushels added to today’s number, but the number that did come through of 1.81 is actually about 100 million bushels less than what was expected today,” he said.
The U.S. balance sheet for corn shows an estimate of 14.78 bb, Hultman said, which was a little less than what was anticipated, and yield estimates were also reduced to 180.7 bushels to the acre. Acreage numbers, however, were left unchanged.
Changes in demand estimates brought a reduction in feed demand by 25 million bushels (mb), but the export number was very favorable with an increase of 75 mb.
“Corn export pace has been very impressive so far,” he said. “We are just in the first month, basically, of the new crop season and the corn shipments are up 50 percent from a year ago. Today’s increase in the export estimate was no surprise in my mind, anyway, and well deserved for corn.”
The estimate for corn exports was increased to 2.475 bb.
“That’s a fairly healthy number for corn exports,” he said. “U.S. corn shipments are 180 million bushels so far this year. It’s a strong pace and a well deserved increase from the export estimate.”
The corn ending stocks estimate is 1.81 bb, which Hultman said is a comfortable amount, and the price forecast from the USDA is keeping prices in the $3 to $4 a bushel range.
World ending stock numbers increased from 157 million metric tons (mmt) to 159.3 mmt.
“That came largely from a revision from the cold crop season and part of that revision was due to higher U.S. production that was anticipated, but also, they reduced the overall corn demand estimate in the old crop season by three and a half million metric tons, so that made a bit of a difference,” he said.
As far as current estimates for the new crop season, Hultman said there was little change in the world numbers.
“Keep in mind, that the ending stocks estimate of 159 is still down roughly 20 percent from what we saw in the old crop season, which is now being estimated at 198.2 million metric tons,” he said “We’re still looking for a substantial drop in world supplies of corn in the new crop 2018-19 season. That has not changed.”
With demand indicators, Hultman said he likes to compare what’s happening in the market versus what the USDA says. Sometimes there is disagreement and sometimes there’s confirmation.
“Right now, we don’t see strong signs of demand when it comes to looking at corn basis and of course that would be expected this time of year with the anticipation of harvest and the anticipation of big supplies,” he said.
As of last Thursday, Hultman said there was a fairly weak basis being shown 43-cents under the December contract, which is weaker than what we normally see.
“There’s not a strong demand as far as around the country yet for the cash price,” he said. “As we work through the season, there is expected to be a better commercial demand for corn as we get more toward the summer months.”
Seasonal tendency for corn, which Hultman said should be a familiar pattern, is a high in price in early June with early October bringing the lows.
“The big drop this summer came a little earlier and sharper than it usually does, but now we are in the time of year that seasonal lows are typically made for corn and it seems to be a fairly normal pattern we see playing out,” he said.
The soybean crop estimate is at 4.69 bb, Hultman said, which is basically the same as last month’s total, but still less than what was expected in the October report, which was closer to 4.73 bb.
The new ending stocks estimate for U.S. soybeans of 885 mb, Hultman said, is just a little bit higher from last month’s 845 mb number, but not a shock as it is roughly the increase that was anticipated stemming from the September 28 grain stocks report.
Also for soybeans, a yield estimate of 53.1 bushels to the acre is anticipated which is also up from the September estimate, but not as high, Hultman said, than was expected of 53.4 bushels to the acre.
Also worth noting in the production side is harvested acres for soybeans Hultman said these were brought down from last month’s estimation of 88.9 million acres to 88.3 million acres.
“The reduced harvested acre side helped to keep the soybean estimate where it stayed,” he said. “The production estimate of 4.69 billion bushels is very close to what they said just a month ago. But, they took a little different route in how they got to a similar number. They lowered the harvested acres to 88.3 from 88.9 and the yield estimate was raised from 52.8 to 53.1. A little fewer acres, little better yield.”
However, with the wet conditions that have plagued most of the producers this year in the Midwest, there are a lot of crop quality issues.
“We have a lot of soybeans out there in wet fields. They may not do very well at the elevators; they may not even be accepted in some cases,” he said. “We’ve got soybeans under snow right now and these numbers are all in pencil, and it may be until January until we sort out a better estimate.”
World estimates for soybeans from the USDA, Hultman said, also showed little change, but the ending stocks for the new crop season rose from 108.3 mmt to 110 mmt.
“And again, as with corn, that was largely the result of a revision in the old crop season,” he said.
The USDA also provided an estimate on what they believe China will be importing. This estimate, Hultman said, includes imports from all sources, not just the United States.
“They kept it unchanged at 94 million metric tons,” he said. ” Some are saying that is higher and China itself, I think their estimate was down around 86 million metric tons. The question is, is China going to keep up their typical level of soybean consumption? Or are they going to restrain and cut back to survive this trade war process? So, far, we have not seen USDA make a drastic change to their (China) consumption estimate of soybeans.”
The soybean basis as of October 11, Hultman said, is some of the weakest we have seen in at least 11 years.
“It’s a very tough time for soybeans right now,” he said. “Add the new crop quality concerns we have and we have some very tough situations out in the country this fall.”
The export estimate for soybeans remained unchanged and will stay at 2.06 bb. New crop soybean shipment estimates so far this year are just 114 mb, which is down, Hultman said from 23 percent a year ago.
“It was a bit surprising to me today USDA did not revise their export estimate lower,” he said. “I think we can probably expect that moving forward.”
From now until the beginning of 2019, Hultman thinks will open up some trade opportunities for U.S. soybeans.
Currently the main suppliers of soybeans are the United States and Brazil.
“It’s basically down to the U.S. or Brazil, and Brazil looks like they’re going to be out of the game for a while,” he said. “This is typically the time of year, from October to February, when the U.S. has its best chance to make good soybean sales.”
Much like corn, soybeans also have the seasonal tendency to see highs in the market about the end of June and lows typically it in early October.
“We saw a sharper than usual downturn this year with the trade war on, but we are still following basically the same seasonal pattern,” he said. “This is typically the time of year were soybean cash prices are making their seasonal lows.”
But will those seasonal tendencies continue on next year?
“Of course there’s going to be a lot of question as to if the pattern will hold up as far as working higher toward early next summer in this trade situation,” he said.
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