USDA Reports Preview

By Darin Newsom
DTN Senior Analyst

OMAHA (DTN) -- The most shocking thing about the October Crop Production and Supply and Demand reports would be if USDA's numbers are outside pre-report ranges.

USDA will release the two reports at 11 a.m. CDT Friday.

SOYBEANS

Let's start this preview by looking at soybeans, not because the world will be paying attention but because those providing pre-report estimates had a hard time guessing where USDA might go next with its always fluid view of soybean production and supply and demand. Notice that the range for 2015-2016 ending stocks runs from a high of 511 million bushels to 125 mb as compared to USDA's September estimate of 450 mb. Forget Pin The Tail On The Donkey, this is a game of Pin The Tail On The Continent, most notably Asia. If USDA misses this range, some sort of investigation should be immediate in coming.

If we just go with the average pre-report estimate of 398 mb, analysts would be looking for a 52 mb decrease from USDA's September guesstimate. Notice that this is roughly equivalent to the expected change in production from September's 3.935 billion bushels to the pre-report average of 3.884 bb. What then of USDA's reduced beginning stocks (old-crop ending stocks) of 19 mb, the difference between USDA's September estimate (210 mb) and its expected surprise reduction to 191 mb quarterly stocks figure from Sept. 30? Either pre-report guessers forgot about this adjustment, or another reduction in total demand is expected. Recall that the July report pegged total demand at 3.745 bb, the August report at 3.717 bb, and the September at 3.725 bb.

World ending stocks are also expected to dip slightly, most likely a reflection of the slight reduction in U.S. production. The bottom line in soybeans is, as usual, nobody knows what move USDA is going to make with domestic numbers.

CORN

Though USDA's corn numbers are rarely as entertaining as its soybean guesses, King Corn usually gets the headlines. Truth be told, it's probably fair given that there at least seems to be an attempt at realistic numbers from USDA regarding corn, usually. With that in mind, pre-report estimates for U.S. ending stocks averaged 1.498 bb, down 94 mb from USDA's September estimate of 1.592 bb. With production expected to decrease 124 mb, an average pre-report estimate of 13.461 bb compared to September's 13.585 bb, a decrease in total domestic demand would be implied.

However, attention should still be paid to old-crop ending stocks. Though USDA's quarterly stocks figure came in at 1.731 bb, nearly unchanged from its September estimate of 1.732 bb, further adjustments could be made in old-crop exports that appeared (according to USDA's own weekly export sales totals) to come up short of the projected 1.875 bb.

As for world ending stocks numbers, pre-report estimates averaged 189.2 million metric tons, down slightly from September's WASDE figure of 189.7 mmt. As with soybeans, this adjustment would most likely be due to the slight revision in U.S. production, with the world's other two largest producers (China and Brazil) expected to see unchanged figures.

WHEAT

Wheat always seems to take a backseat to corn and soybeans, particularly this time of year. However, this month's new-crop ending stocks guess from USDA could prove to be interesting, given the wide range from 896 mb to 765 mb as compared to the September figure of 875 mb. The pre-report average came in at 821 mb, leading to the question of where those 54 mb went. Could it be larger exports? Unlikely, though a continued downtrend in the U.S. dollar index and Russia's activity in the Middle East might raise hopes (there's that word again) of increased interest in U.S. supplies.

The safest bet is that pre-report estimators are anticipating USDA to incorporate its own reduction of 84 mb of production from the August monthly report to the Sept. 30 small grains summary. If so, then the implication would be that demand is expected to be reduced by about 30 mb, a likely scenario given the pace set over the first third of the 2015-2016 marketing year (USDA's total shipments are running 18% behind last year as opposed to USDA's September estimate of a 5% year-to-year increase).

World ending stocks for 2015-2016 are also expected to be reduced, the average pre-report estimate coming in at 224.7 mmt compared to the September WASDE figure of 226.6 mmt. While most of this is expected to come from the reduction in U.S. production, keep an eye on the estimates for the world's other two largest wheat producers, the European Union and the 12 nations of the former Soviet Union. Both saw increased production estimates from August to September, most notably the 6.31 mmt for the European Union.

Editor's note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CDT on Friday for a discussion on the latest USDA reports. Sign up now at: https://goo.gl/….

Darin Newsom can be reached at darin.newsom@dtn.com

(AG/CZ)

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