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Bearish Report Pressures Grains Even Lower

Drop in exports increases U.S. soybean carryout.

DES MOINES, Iowa — Friday’s USDA Supply/Demand report was uniformly bearish. “We’re just swimming in grain, that’s the bottom line,” says Don Roose of U.S. Commodities in West Des Moines, Iowa.

At midday, shortly before the Supply/Demand report was released, the markets were treading water. After the report, midday trading had soybean futures flat to down 3¢ a bushel and corn contracts were down 2¢ to 6¢.

“I think the trade had already figured it was going to be a rough report,” says Iowa State University agricultural economist Chad Hart. “The market got what it expected so there’s no reason to continue to beat prices down.”

U.S. 2018/19 Grain Ending Stocks

In its May Supply/Demand and WASDE Reports, the USDA pegged the U.S. 2018/19 marketing year corn ending stocks at 2.095 billion bushels, compared with the trade’s expectations of 2.06 billion bushels and the USDA’s previous estimate of 2.035 billion.

For soybeans, the USDA pegged the U.S. 2018/19 ending stocks at 995 million bushels vs. the government’s previous estimate of 895 million and the trade’s estimate of 920 million bushels. The 100-million-bushel jump was largely due to downward revision in exports.

In its report, the USDA estimates 2018/19 marketing year wheat ending stocks at 1.127 billion bushels vs. the USDA’s previous estimate of 1.087 billion bushels and the trade’s estimate of 1.087 billion.

U.S. 2019/20 Grain Ending Stocks

In its May Supply/Demand and WASDE Reports, the USDA made its first estimate of 2019-20  marketing year ending stocks. USDA pegged the U.S. corn ending stocks at 2.485 billion bushels, compared with the trade’s expectations of 2.125 billion bushels.

For soybeans, the USDA pegged the U.S. ending stocks at 970 million bushels vs. the trade’s estimate of 936 million bushels.

In its report, the USDA estimates 2019/20 marketing year wheat ending stocks at 1.141 billion bushels vs. the trade’s estimate of 1.087 billion.

2018/19 U.S. Grain Ending Stocks (million bushels

USDA May

Trade Estimate

USDA Previous

Corn

2.095

1.99 billion

2.035 billion

Soybeans

995

903 million

895 million

Wheat

1.127

1.075 billion

1.087 billion

USDA 2018/19 World Grain Ending Stocks

For corn, the world’s ending stocks are pegged at 325.9 million metric tons (mmt.) vs. the trade’s estimate of 315.6 mmt. and the USDA’s previous estimate of 314 mmt.

The USDA sees the 2018/19 world soybean ending stocks at 113.2 mmt. vs. the trade’s average estimate of 108.8 mmt. and the USDA’s previous estimate of 107.4 mmt.

In its report Friday, the USDA pegged the world’s wheat ending stocks at 275 mmt. vs. the previous estimate of 275.6 mmt. and the trade’s expectation of 276.3 mmt.

USDA 2019/20 World Grain Ending Stocks

For corn, the world’s ending stocks are pegged at 314.7 million metric tons (mmt.) vs. the trade’s estimate of 306.6 mmt.

The USDA sees the 2018/19 world soybean ending stocks at 113.1 mmt. vs. the trade’s average estimate of 111.6 mmt.

In its report Friday, the USDA pegged the world’s wheat ending stocks at 293 mmt. vs. the trade’s expectation of 277.3 mmt.

USDA 2018/19 World Crop Production

For Brazil, its 2018/19 soybean production is pegged at 117 mmt. vs. the USDA’s previous estimate of 117.0 mmt. and the trade’s expectations of 117.0 mmt.

The USDA pegged Argentina’s soybean production at 56 mmt. vs. its previous estimate of 55.0 mmt. and the trade’s expectation of 55.8 mmt.

In its report, the USDA pegged the Brazilian corn production at 100 mmt. vs. its previous estimate of 96.0 mt. and the trade’s expectation of 96.5 mmt.

For Argentina, USDA sees its corn production at  49 mmt. vs. a previous estimate of 47.0 mmt. and the trade’s expectation of 48.0 mmt.

Trade Response

“There was nothing positive in the report,” says analyst Don Roose of U.S. Commodities. “Really, the drag on the thing is the competition in the world.”

USDA released its first estimate of crop prices for the new-crop marketing year of 2019-20. It no longer releases a range of prices, just an average. For corn, it’s pegged at $3.30 a bushel and for soybeans the projection is $8.10 per bushel.

From now on, Roose says, “the market will determine what is the fair market value for these huge supplies.”

ISU economimsts Hart says the report could have been worse. 

“There are some positive arguments here, but they’re mostly on the livestock side,” he says.

“For 2020, USDA is projecting a 1.8-billion-pound increase in meat and poultry production over this year,” Hart says. Department economists project total production at 106 billion pounds. That increase will help offset some lost exports with domestic feed use.

However, that estimate is slightly smaller than numbers USDA put out at its Agricultural Outlook Forum last February, Hart says.

In the grains section of Friday’s report, Hart saw fewer positives. Projections for increased corn carryouts are due in part to a 50-million-bushel reduction in ethanol from the USDA’s April Supply/Demand report.

The increased soybean carryout is entirely due to a 100-million-bushel drop in exports, he says.

The result is an old-crop carryout of almost 1 billion bushels for soybeans (995 million bushels).

“We haven’t had stocks that high before, not even close,” Hart says while looking at carryout numbers going back to 1964.

The large carryout stems from several years of a U.S. soybean harvest of more than 4 billion bushels as well as lost exports.

When asked if U.S. soybean exports are finding new destinations to replace sales lost to China during the current U.S. trade war with that country, Hart sees few signs of that.

“Soybeans are a fungible commodity, but it does take a while for the market to rebalance,” he says. “We can argue that the entire reduction in exports is due to China.”

That rebalancing could be taking longer than the USDA expected last winter, when the Outlook Forum projected U.S. soybean exports at 2.025 billion bushels for next year.

Friday’s report trimmed 2019/20 exports to 1.95 billion bushels. 

In those three months since the Outlook Forum, USDA has also trimmed its price projection for soybeans from $8.80 a bushel to $8.10.

“They really had to step back on the price outlook in just a few months,” Hart says.

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