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USDA Data Seen as Bearish for Corn Market

Corn, soybean prices close unchanged.

DES MOINES, Iowa — The U.S. corn pile continues to grow, while soybean stocks drop slightly, according to the USDA.

At the close, the May futures finished unchanged at $3.60. July futures closed unchanged at $3.68 1/2.
 
May soybean futures closed unchanged at $8.98 3/4. July soybean futures ended unchanged at $9.11 3/4.

May wheat futures closed 5 3/4¢ lower at $4.59 1/4.

May soymeal futures closed $0.10 short ton lower at $309.10. May soy oil futures ended 0.16 higher at 28.04¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.33 lower, the U.S. dollar is lower, and the Dow Jones Industrials are 181 points lower.

U.S. 2018/19 Grain Ending Stocks

In its April Supply/Demand and WASDE Reports, the USDA pegged the U.S. 2018/19 marketing year corn ending stocks at 2.035 billion bushels, compared with the trade’s expectations of 1.99 billion bushels and the USDA’s previous estimate of 1.835 billion.

For soybeans, the USDA pegged the U.S. 2018/19 ending stocks at 895 million bushels vs. the government’s previous estimate of 898 million and the trade’s estimate of 903 million bushels.

In its report, the USDA estimates 2018/19 marketing year wheat ending stocks at 1.087 billion bushels vs. the USDA’s previous estimate of 1.055 billion bushels and the trade’s estimate of 1.075 billion.

2018/19 U.S. Grain Ending Stocks (million bushels USDA April Trade Estimate USDA Previous
Corn 2.035 1.99 billion 1.835 billion
Soybeans 895 903 million 900 million
Wheat 1.087 1.075 billion 1.055 billion

USDA 2018/19 World Grain Ending Stocks

For corn, the world’s ending stocks are pegged at 314 million metric tons (mmt.) vs. the trade’s estimate of 331.3 mmt. and the USDA’s previous estimate of 308.5 mt.

The USDA sees the 2018/19 world soybean ending stocks at 107.4 mmt. vs. the trade’s average estimate of 108.3 mmt. and the USDA’s previous estimate of 107.2 mmt.

In its report Tuesday, the USDA pegged the world’s wheat ending stocks at 275 mmt. vs. the previous estimate of 270.5 mmt. and the trade’s expectation of 270.9 mmt.

USDA 2018/19 World Crop Production

For Brazil, its 2018/19 soybean production is pegged at 117.0 mmt. vs. the USDA’s previous estimate of 116.5 mmt. and the trade’s expectations of 116.2 mmt.

The USDA pegged Argentina’s soybean production at 55.0 mmt. vs. its previous estimate of 55.0 mmt. and the trade’s expectation of 55.4 mmt.

In its report, the USDA pegged the Brazilian corn production at 96.0 mmt. vs. its previous estimate of 94.5 mt. and the trade’s expectation of 94.7 mmt.

For Argentina, USDA sees its corn production at 47.0 mmt. vs. a previous estimate of 46.4 mmt. and the trade’s expectation of 46.6 mmt.

Trade Response

Jason Ward, Northstar Commodity’s managing director, says that the stocks totals on corn were the highlight (or lowlight) with 200 million bushels added to the ending stocks.

“And USDA accounted for it via all 3 usage categories, (75 mil reduction in feed), (75 mil/bu reduction in exports) and 50 million bushel reduction in corn used for ethanol,” Ward says.

Ward added, “No one can argue the ethanol or export numbers, as they have been well documented. We are lagging in both categories. But, the feed usage lowering again is in our view a reflection of a larger crop in 2018 than previously reported, not less feed fed to more livestock units than a year ago (or near record livestock units).”
 
So, at face value it is a bearish corn report with stocks swelling over 2.0 billion bushels at 2.035 bil/bu, Ward says.

“We are, however, below a year ago in corn supply by 105 mil/bu and we still have 5 months of usage left to account for, and the entire U.S. growing season.
Another point to make though, is our competition’s crop in South America is getting larger, with increases reported in both the Brazilian corn crop and the Argentine corn crop (+2.5 MMT in total),” Ward says.
 
The USDA’s wheat and soybean numbers are easily explained, Ward says.

“In soybeans, we chipped 5 mil/bu off carryout down to 895 million bushels (imports decreased by 3 million and seed increased by 2 mil/bu for the total of 5 mil/bu),” Ward says.
 
Wheat was a decrease in exports by 20 mil/bu which lead to higher stocks.
 
Ward added, “So, here is the food for thought from today’s report? Have we built in the biggest stocks number that we are going to see for corn? Bigger crop and lower usage? Does the financial/speculative community bank some profits on their near record short position, as we head into another major growing season here in the U.S. Can the corn market garner some risk premium in Dec 2019 futures contract from $3.89?”

Make no mistake about it though, if we achieve trend line yield of 176 bu/acre on corn and 90-92 million acres get planted, new crop values will be substantially lower than $3.89 in my view, but we have to achieve those 2 big scenarios, Ward says.

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