USDA Data Seen as no Big Shakeup for Farm Markets

World corn ending stocks drop, supporting prices.

DES MOINES, Iowa — Yes, today’s USDA U.S. old-crop soybean ending stocks estimate is lower than a month ago, but not far enough for investors.

Also, the South Americans keep growing larger crops, putting pressure on the farm markets.

As a result, the Wednesday CME Group’s futures prices jumped briefly then turned mixed, reacting to the USDA May Supply/Demand and WASDE Reports.

At the close, the July corn futures finished 7¼¢ higher at $3.73¾, and December futures ended 6½¢ higher at $3.91½.

July soybean futures closed 3¾¢ lower at $9.70¼; November soybean futures finished ¾¢ lower at $9.66¾. July wheat futures closed 2¼¢ higher at $4.31¾. July soy meal futures finished $0.80 per short ton lower at $317.70. July soy oil futures finished 0.61¢ lower at 32.28¢ per pound. In the outside markets, the Brent crude oil market is $1.39 per barrel higher, the U.S. dollar is higher, and the Dow Jones Industrials are 39 points lower.

U.S. Ending Stocks 2016/2017

In its monthly report, USDA pegged the U.S. 2016/2017 soybean ending stocks at 435 million bushels vs. last month’s estimate of 445 million and the average trade estimate of 438 million.

For corn, the old-crop ending stocks were estimated at 2.29 billion bushels vs. the average trade estimate of 2.32 billion bushels and the USDA’s April estimate of 2.32 billion.

The 2016/2017 U.S. wheat ending stocks estimates came in at 1.15 billion bushels vs. the average trade estimate of 1.16 billion bushels and the government’s April estimate of 1.15 billion bushels.

U.S. Ending Stocks 2017/2018

In its May report Wednesday, USDA pegged the U.S. 2017/2018 soybean ending stocks at 480 million bushels vs. the average trade estimate of 555 million.

For corn, the old-crop ending stocks were estimated at 2.11 billion bushels vs. the average trade estimate of 2.12 billion bushels.

The 2016/2017 U.S. wheat ending stocks estimates came in at 914 billion bushels vs. the average trade estimate of 1.01 billion bushels.

World Crop Production

The USDA/WASDE sees the 2016/2017 soybean production, in Brazil, growing to 111.60 million metric tons, compared with the average trade estimate of 111.3 million metric tons and the USDA’s April estimate of 111.0 mmt.

Brazil’s corn crop is pegged at 96.0 mmt. vs. the average trade estimate of 94.2 mmt. and the USDA’s April estimate of 93.5 mmt.

In its report, USDA/WASDE pegged Argentina’s soybean crop at 57.0 mmt. vs. its estimate last month of 56.0 mmt. and the average trade estimate of 56.1 mmt.

Argentina’s corn crop is pegged at 40 mmt. vs. the average trade estimate of 38.4 mmt. and the USDA’s previous estimate of 38.5 mmt.

Trade Response

Jack Scoville, The PRICE Futures Group’s Senior Market Analyst, says that the soybean market has turned lower, though domestic estimates came in about as expected.

For corn, why USDA is putting exports next year so low must mean that they believe South America’s corn crop is coming back, Scoville says.  

“Even so, corn exports estimate seems pretty extreme.  No real problem with the old crop data,” Scoville says.  

Wheat prices are hanging in there, today. I think this has as much to do about ideas that the damage seen in the last week or so are not here. And, even so, these are pretty decent numbers with ending stocks for next year showing a very solid drop as they should,” Scoville says. 

Mike North, President Commodity Risk Management Group, says that the USDA’s corn projections held close to pre-report guesses.  

“Soybeans saw limited growth in domestic supplies, as projected exports continue to build into the next marketing year.  However, the offset to this friendly story comes in the fact that Brazil and Argentina have continued to add to their record production numbers,” North says.  

North add, “With that information in hand, we essentially have not changed the story for traders seeking something more robust to move markets outside of the existing range.”

Sal Gilbertie,  Teucrium Trading owner, says the biggest takeaway from this report is the lowering of global ending stocks, mainly for the U.S. and China, for the 2017/18 marketing year, due to lower production and increased use.

“Corn production is forecast down from a year ago, with the largest declines in China and the United States. Partly offsetting are larger crops projected for the EU and Canada. Global corn use is up 9 million tons (1 percent), while global corn imports are projected to increase 7 million tons,” Teucrium pointed out from the WASDE Report summary.

The immediate upward response in corn prices to this report is a reflection of simple supply/demand fundamentals, Gilbert says.

“The USDA predicts that the world will use more corn but produce less corn in the coming year. The official first-of-the-season report predicts that the world’s two largest producers of corn are projected to produce less corn than last year, but global corn demand is expected to be up by 1% from last year,” Gilbert says. Corn is king, which means other markets will look to corn for price direction.”

Overall, grain prices are sitting at multi-year lows due to four years of record global production, but this report could be a warning shot of changing fundamentals moving forward into the new growing season, Gilbert says.

“It’s still very early and planting progress reports are still evolving with a few more weeks to go before markets get some actual clarity. Right now, end-user complacency with regard to grain prices could be a risky path to take,” Gilbert says.

Jason Roose, U.S. Commodities grain analyst, says that farm markets are finding support today from the USDA’s 2017-18 data.

“The lower 2017/2018 corn world ending stocks and a continuing strong ethanol demand gave initial support to the corn market. Plus, the larger crush and lower ending stocks gave soybeans initial support,” Roose says.

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