USDA Reports Preview

By Darin Newsom
DTN Senior Analyst

Ch-Ch-Ch-Ch-Changes ... Look for a lot of changes to both corn and soybean production tables in USDA's October reports on Wednesday. Planted/harvested acres, yield, and crop production are all expected to be revised from September. This in turn will change supply and demand tables for both as these numbers combined with the Sept. 30 quarterly stocks figures (2015-2016 stocks turned to 2016-2017 beginning stocks) will alter supplies while total demand remains a mystery.

USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CDT Wednesday.

Ch-Ch-Changes ... Let's start with harvested acres. In its September round of reports, USDA pegged corn at 86.6 million acres and soybeans at 83.0 ma. These are expected to see only slight adjustments, with average pre-report estimates coming in at 86.8 ma and 83.1 ma, respectively. The fact both are well above last year's "final" 80.7 ma and 81.8 ma was factored into market price long ago. Keep in mind, though, that October is when USDA can revise acreage numbers by far more than expected, historically up to a million acres difference. In other words, don't be surprised by a surprise.

Ch-Ch-Ch-Ch-Changes ... More meaningful changes are expected in national average yield estimates. Pre-report averages pegged corn at 173.4 bushels per acre and soybeans at 51.4 bpa. In September, USDA guessed these to be 174.4 bpa and 50.6 bpa, meaning both could change by almost a full bushel per acre. While that doesn't seem like much, the result on ending stocks could be dramatic. However, if USDA decides to follow early chatter on soybeans, the change could be far more dramatic, possibly coming in at or above the high side of pre-report guesstimates at 52.5 bpa. If so, keep another of Bowie's lines in mind: "Don't want to be a richer man."

Ch-Ch-Changes ... For now, changes in production seem to be priced into the markets. The pre-report average for corn came in at 15.040 billion bushels, down slightly from September's 15.093 bb, but still record large by almost 825 mb (2014 production is still estimated at 14.216 bb). It's interesting to note that even if USDA comes in near the low end of pre-report estimates at 14.713 bb, it would still be a record crop by roughly 500 million bushels. Similarly, soybean production was guessed to be 4.277 bb, 76 mb above USDA's September estimate of 4.201 bb. However, if USDA comes in closer to the high side of pre-report guesses at 4.357 bb then, "Just gonnna have to be a different man."

Ch-Ch-Ch-Changes ... Some large revisions could also be seen in ending stocks for corn and wheat, but more notably soybeans. The corn number is expected to drop about 20 mb from USDA's September figure of 2.384 bb, but still the largest seen since the 1987-1988 marketing year. Pre-report guesses for wheat ending stocks averaged 1.151 bb, up about 5% from USDA's September estimate of 1.100 bb. Soybeans are expected to steal the ending stocks show. The average pre-report estimate came in at 415 mb, up 50 mb (or 13.6%) from USDA's September estimate of 365 mb. But what if USDA decides to increase production more than expected? It's no stretch of the imagination to envision soybean ending stocks revisiting the 500 mb level last seen in USDA's May 2015 report when it released its initial guess of 2015-2016 supply and demand, a figure that would eventually be whittled to 195 mb in the most recent Quarterly Stocks report.

Ch-Ch-Changes ... World ending stocks are expected to be a little less dramatic than the U.S. numbers. Unless, of course, the U.S. estimates come in way out of line with pre-report estimate. World corn ending stocks are expected to show a small decrease to 219.1 million metric tons, world wheat a small increase to 250.2 mmt, and soybeans once again the wildcard. The average pre-report estimate came in at 73.1 mmt, up slightly from September's 72.2 mmt, but vulnerable to a larger increase depending on what happens to the U.S. number. Also on the global scene, soybean ending stocks could be influenced by a possible increase in Brazilian production for 2016. The September WASDE pegged this at 101 mmt, with recent headlines out of Brazil coming in around 103 mmt.

In the end -- and given the sideways trends seen in all three grains heading into the October reports -- keep in mind one last line from the song: "I watch the ripples change their size, but never leave the stream."

We'll see if that holds true Wednesday.

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Editor's note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CDT Wednesday for a look at the latest USDA Supply and Demand and Crop Production estimates. Register now at: http://goo.gl/…

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

Follow him on Twitter @DarinNewsom

(CZ/ES/AG)

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