July WASDE report brings anticipation for August’s numbers
By KRISS NELSON
Last Tuesday, the USDA released the July World Agriculture Supply and Demand Estimates (WASDE) utilizing the large corn and soybean acreage numbers it released last month.
“The July WASDE report from the USDA has been widely anticipated and one of the big questions we had was, were they going to use the acreage estimates from the June 28 report for corn and soybeans,” said Todd Hultman, DTN grain analyst. “And yes, they did use that again for today’s numbers.”
Several questions remain about the 91.7 million acre corn planting estimate the USDA gave last month which ultimately led to a larger ending corn stocks number.
“Probably more than the market deserves,” said Hultman.
The market showed little response directly following the release of the July WASDE numbers.
“As far as the market itself, I think there is some broad understanding that there is still a lot of questions about the planting estimate and they’re not really going to take today’s number too seriously,” he said.
Hultman called corn numbers in the July WASDE report bearish due to the higher ending corn stocks estimate that was given for both the U.S. and the world.
“I think corn acres are overstated and that’s no surprise,” he said. “It’s not a minority opinion either, I don’t think.”
In the new crop estimate, using the 91.7 million acres of corn planting and a yield of 166 bushels to the acre, the U.S. balance sheet for corn brought a new corn production estimate of 13.875 billion bushels (bb).
“Again, I think that is higher than reality,” he said. “The ending stocks estimate for the new crop season is now slightly over 2 billion bushels. That is up from 1.675 billion bushels in the June WASDE estimate.”
The export estimate for the current old crop season was reduced by 100 million bushels (mb) for corn.
“That is not a surprise,” Hultman said. “The main point of today’s estimate from USDA is they put the ending stocks back up to 2 billion bushels based on a higher planting estimate than we think is actually out there.”
World corn estimates
World corn estimates for the current old crop season brought a 2 million metric ton (mmt) increase in Argentina’s crop estimate while Brazil’s current corn crop estimate stayed unchanged at 101 mmt.
“Both of those countries are having better production this year than what they saw a year ago,” he said.
Ending stocks estimates for world corn saw an 8 mmt increase up to 298.92 mmt.
“The lion’s share of this increase in world stocks estimate is coming from the U.S.,” he said.
Additionally, he said there is a second planting survey for 14 states taking place in July and the results of that survey will be available in the August WASDE report.
“A lot of these numbers, hopefully, will be corrected to be more in line with what most analysts and market watchers are thinking,” he said. “But for today, we are looking at some pretty big increases for the ending corn stocks estimate for the world and for the U.S.”
There was a 100 mb reduction in the old crop export estimate from 2.2 mb to 2.1 mb. This equals out to pace of 30 mb needed of corn shipped per week for the next eight weeks to meet that estimate target.
“The total commitment project right now, we are on pace for about 2.07 billion bushels,” he said. “Today’s 100 million bushel reduction in the estimate puts us within about 28 million bushels of that pace. I would agree that today’s reduction in the corn export estimate is justified.”
Brazil and Argentina are beginning to cut into the United States’ export total and Brazil’s corn is trading a little cheaper than the United States’ corn at this time.
“Brazil has the competitive advantage right now when it comes to exports,” he said. “Part of that is the result of our success of getting our U.S. corn prices to bid up higher.”
“For soybeans, overall, the report was basically neutral – maybe a little less bearish than it has been,” Hultman said. “We still have a lot of bearish concerns for our soybean prices.”
U.S. supply and demand estimates for soybeans for July in the new crop season were based on the 80 million acre planting estimate from last month’s report.
“Just as there’s a question about corn acres, there is also a question about soybean acres and that is an estimate that could get adjusted as well in the Aug. 12 update,” said Hultman.
The estimated yield for soybeans was dropped by a bushel an acre from 49.5 to 48.5 bushel an acre.
“One thing to note in this year’s yield estimate is that we typically get an objective field survey of yield estimates in the month of August,” he said, “but USDA has changed policy on that this year, so we are not going to get any field report on our yield estimates until September.”
With the lower planting estimates and lower yields, USDA released a lower soybean crop estimate of 3.845 bb, down from 4.15 bb a month ago.
Ending stocks are now down to 795 mb.
“That’s a fairly decent drop from the 1.045 billion bushels than we saw a month ago,” he said.
The ending stocks estimate increased by just 5 mb up to 1.05 bb and the export estimate stayed the same.
Hultman said there was a pretty hefty drop in the USDA estimate of world ending stocks coming down from 112.7 mmt last month to 104.5 mmt.
“It came largely as a result of the reduction of the U.S. crop,” he said.
China’s import estimate for soybeans was kept unchanged at 87 mmt.
“Our concern there is related to the African swine fever and the impact it might have on feed demand as there’s been so much hog loss across the country,” he said. “Not just China, but spreading throughout Southeast Asia and also reports of cases in Bulgaria.”
Old soybean crop estimates for Brazil and Argentina stayed unchanged in this report.
How are soybean exports doing?
Hultman said the soybean export estimate was also unchanged, with the USDA keeping it at 1.7 bb.
“Similar to corn, we need about 30 million bushels of soybeans shipped each week to make USDA’s estimate,” he said. “Total shipment projection, right now, is actually a little bit favorable – it’s a little higher than the 1.7 billion bushels at 1.81 billion bushels. The shipments are doing OK right now. But that assumes that China’s outstanding sales will be shipped. Right now, China is holding about 210 million bushels of sales on the books that are not shipped yet. There’s always a risk there could be cancellations and will probably depend on how new trade negotiations go. That is always a risk we want to be aware of.”
The United States’ soybean crush premium is holding up, which Hultman said is good news for soybean demand.
“It’s nothing like what it was a year ago when Argentina’s drought was going on, and of course this year Argentina – their soybean production is back, as is Brazil’s,” Hultman said. “They had another big crop again this year.”
Argentina is expected to increase its soybean meal exports from 25.3 to 28.1 mmt this year.
“That is a little increased competition that U.S. soybean meal is going to have,” he said. “But so far the crush incentive is still enticing for U.S. soybeans.”
The Aug. 12 report is one that many are anticipating.
“That will be potentially a big market mover that day and we will have a lot of attention going into that report,” he said.
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