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U.S. Grain Stocks Get Smaller, USDA Report Shows

World numbers get mostly raised.

DES MOINES, Iowa — The U.S. corn and soybean supplies are getting smaller than the USDA had first thought, according to Tuesday’s report.

As a result of the market-friendly numbers from the government, the CME Group’s farm markets have moved higher.

At the close, the July corn futures finished 10¼¢ higher at $3.77½. December futures closed 10¢ higher at $3.98¼.

July soybean futures finished ¼¢ higher at $9.54.  November soybean futures finished 3/4¢ higher at $9.74½.

July wheat futures settled 20¢ higher at $5.34½.

July soy meal futures closed $2.30 per short ton higher at $353.50. July soy oil futures ended 0.53¢ lower at 30.05¢ per pound. 

In the outside markets, the NYMEX crude oil market is $0.05 higher, the U.S. dollar is higher, and the Dow Jones Industrials are 55 points lower.

2017/18 U.S. Ending Stocks

The USDA pegged the 2017/18 corn ending stocks at 2.102 billion bushels vs. the trade’s expectations of 2.16 billion bushels and USDA’s May estimate of 2.182 billion.

The 2017/18 soybean ending stocks are estimated at 505 million bushels vs. the trade’s estimate of 522 million bushels and the USDA’s May estimate of 530 million bushels.

The USDA’s 2017/18 wheat ending stocks estimate is 1.08 billion bushels, vs. the average trade estimate of 1.07 billion bushels and the USDA’s May estimate of 1.07 billion bushels.

2018/19 U.S. Ending Stocks

For the U.S., the USDA pegged corn ending stocks at 1.577 billion bushels vs. the trade’s expectations of 1.66 billion bushels and the USDA’s May estimate of 1.682 billion bushels.

The U.S. soybean ending stocks have been pegged at 385 million bushels vs. the trade’s estimate of 417 million and the USDA’s May estimate of 415 million bushels.

The USDA pegged the U.S. wheat ending stocks at 946 million bushels vs. the trade’s expectations of 958 million bushels and the USDA’s May estimate of 955 million.

World Crop Production

USDA pegged the Brazil corn crop at 85.0 million metric tons vs. the trade’s estimate of 84.4 mmt. and the USDA’s May estimate of 87.0 mmt.

For soybeans, the USDA sees Brazil’s crop size at 119.0 mmt. vs. the average trade estimate of 117.4 mmt. and the USDA’s May estimate of 117.0 mmt.

For Argentina, USDA pegged the corn crop at 33.0 mmt. vs. the USDA’s May estimate of 33.0 mmt. and the trade’s estimate of 32.5 mmt. And,USDA sees Argentina’s soybean production at 37.0 mmt. vs. the trade’s expectation of 37.9 mmt. and the USDA’s May estimate of 39.0 mmt.

Trade Reaction

Sal Gilbert, Teucrium owner, says that this report was farmer-friendly.

“This was clearly a supportive report for grain prices. U.S. corn ending stocks are projected to decline year-on-year by nearly 25%, soybean stocks by over 23%, and wheat stocks by about 12%. Record April U.S. corn exports and ‘robust global demand for U.S. corn’ are likely to keep a floor under prices from current levels. Farmers have to be happy with this report because the fundamental picture is definitely shifting toward a tighter balance sheet for all the major grains,” Teucrium says.

Jason Ward, Northstar Commodity grain managing director, says that the USDA reminded the trade that the world balance sheets are tightening in all categories.

“Also, these price pullbacks in corn/soy have been largely political as uncertainty surrounds key trade deals. The balance sheets tighten with trend line yields out of the U.S., so now we need to keep this 2018 crop an above trend line crop (where it currently it is being estimated),” Ward says.

Ward adds, “This report was a reminder that lower prices will not decrease usage as corn/soy usage was increased in both 2017 and 2018 crop years.”

Jack Scoville, The PRICE Futures Group’s senior market analyst, says that wheat reaction is all about the Russian data.  

“This 3.5 million tons lower month-to-month is a big drop and the reason wheat is so strong now. U.S. data was neutral, as far as I am concerned, maybe a bit negative. Corn is all export demand.”  

Scoville adds, “Brazil and Argentina losing crops in the direction of the trade, but not the magnitude of the expectation. But the strong export demand was great, and the domestic demand next year was, too, and a great reason to buy.”

The soybean numbers are more neutral, as the crush is up, but not a wild report, Scoville says.  

“Wheat and corn will carry the day with soy the follower, and this is about the way it should be from my reading of the market,” Scoville says.

Mike North, president of Commodity Risk Management Group, says that today’s report would be construed as friendly to the row crops.  

“That said, it is actually the wheat market pulling prices higher despite world wheat stocks being 2 and 3 million tons higher than expectations in old crop and new crop respectively,” North says.  

U.S. soybean balance sheets will offer support now that ending stocks dropped to 385 million in the 18/19 marketing year, North says.  

“The reduction in stocks is due to a 25-million-bushel increase to crush for 17/18, and a 5 million increase to crush for new crop. This may, however, hinder soybean meal values as balance sheets are consequently larger,” North says.  

Argentine and Brazilian numbers were in line with expectations. Corn stocks dropping under 1.6 billion is mildly helpful to prices, North says.  

“This comes on the heels of an increase to old-crop exports and new-crop ethanol grind,” North says.  

 

 

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