July WASDE report released
As expected, in the July 11th supply and demand report the USDA chose to use the June 28th acreage figures in their release. Due to this, new crop corn ending stocks came in at 2.010 billion bushels (bb). A large 318 million bushels (mb) higher than the average trade estimate. The fact that the USDA did not change the 166 bushel per acre corn yield forecasts also led to larger than anticipated new crop stocks forecast. Their old crop corn carryout estimate was published at 2.34 billion bushels, 143 million bushels higher than the average trade estimate going into the report. Mainly from a decrease to export demand.
On the soybean side, the USDA also used the June acreage figures. This along with a 1 bushel decrease to the yield estimate to 48.5, decreased new crop production by 305 mb. Old crop carryout shrunk 20 mb to 1.050 bb. Although it was smaller than the June release, the old crop stocks came in slightly higher than expectations.
The initial reaction to the USDA’s updated balance sheets was rather surprising considering some of the changes that were made. The lack of reaction indicates that the confidence in the updated data is very low. Looking back to last July, the USDA had corn carryout forecasted at 1.55 bb and December futures closed just shy of $3.60. Last week’s release has carryout forecasted nearly 500 mb higher at 2.01 bb, while December futures are nearly $1.00 higher than last year.
Now that the July report is in the books, trade will once again focus most of their attention on the weekly condition ratings and weather forecasts for market direction.
The latest crop ratings showed the good-to-excellent corn rating improved 1 percent to 57 percent. This historically low rating has brought comparison to prior years, one being 2012. That year drought conditions decimated the corn crop dropping yields well below trend. The good-to-excellent rating was only 9 percent lower than this year at 48 percent, but the poor-to-very poor rating was 30 percent in 2012 comparted to 12 percent this year.
The latest soybean rating showed a decline of 1 percent to 53 percent good-to-excellent. Expectations were to see an improvement on the week. This figure ties the 3rd lowest rating seen in the past 25 years. Illinois soybean crop saw a large 6 percent drop on the week.
The maturity of this year’s crops are also going to be a larger issue this year than in most due to the delayed planting. Only 8 percent of the corn crop was pollinating in the latest report compared to the average of 22 percent.
The soybean maturity was also largely trailing normal at 10 percent blooming versus 32 percent for the 5 year average. This issue will keep trades attention as an early frost could become a significant problem this year.
We have now officially entered the time of year where weather is forefront of the market, with favorable conditions forecasted across the Corn Belt. Warmer temperatures are expected to help improve crop conditions. The only concern at this time is that if the warmer temperatures are prolonged without a few scattered showers thrown in the mix, it could cause condition concerns.
Since the increase in U.S. corn values over the past month domestic corn demand has been slowing. Larger and cheaper foreign corn supplies are pressuring demand. Ukraine’s corn crop is expected to hit 36 million metric tons (mmt) if favorable weather continues in July, which is higher than the 33 mmt USDA estimate. Currently, Ukraine’s corn is running about thirty cents cheaper than the U.S. Brazil is about a third harvested on their record large second corn crop. While Brazil has followed the CBOT prices higher, Argentina’s export price for corn is around fifty cents cheaper than U.S. supplies.
For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at firstname.lastname@example.org. The opinions and views expressed in this commentary are solely those of Mick Hoover. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.
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