By Todd Hultman
DTN Lead Analyst
With USDA ready to release the results of its second planting survey, all eyes will be on what should be the first credible corn crop estimate of 2019. Soybeans and wheat will have their own new numbers to consider, but the corn estimate has the most potential for surprise and may also influence Monday's soybean and wheat prices.
CORN
If you recall USDA's previous attempt at estimating corn plantings back on June 28, USDA explained that 83% of the intended corn crop was planted in early June when the first survey was being taken. In other words, roughly 77.0 million acres (ma) of corn were planted in early June and 15.8 ma were still unplanted.
What was not well explained was how USDA came to believe 91.7 ma of corn would be planted in 2019, especially as rain afflicted the soggy Eastern Corn Belt well into June. Monday's World Agricultural Supply and Demand Estimates (WASDE) report will factor in a second planting survey of 14 states and should give us a more accurate assessment of how many corn acres were actually planted this year.
At the same time the WASDE report is being released at 11 a.m. CDT, USDA's Farm Service Agency will release its first estimate of prevented plantings for 2019. That will also be interesting to see, especially in this unusual year of excessively wet planting weather, muddied by a federal promise of trade aid that was largely unexplained while fields were being planted.
For those keeping score at home, it is important to remember USDA's July planting estimate total for corn, soybeans and wheat of 217.3 million acres is already 8.8 million acres below the 2018 estimate. That leaves a lot of room for prevented plantings already being factored in and may have added to some of the public confusion about estimating this year's planting total.
Make no mistake, the number of prevented acres will be interesting, but the real key for corn prices moving forward will be the WASDE planting estimate -- not the prevented plantings total.
Yield is the other half of the equation for reaching a crop estimate. While USDA may slightly adjust its corn yield estimate Monday, the new estimate won't mean much until USDA provides the first field based survey on September 12.
In a rare unanimous vote, all 19 analysts in Dow Jones' survey estimated a smaller corn crop than USDA's July estimate of 13.875 billion bushels (bb). Survey estimates ranged from 12.72 bb on the low end to 13.55 bb on the high end, settling for an average crop estimate of 13.164 bb, based on a yield of 165.3 bushels per acre.
If true, that would suggest new-crop U.S. ending corn stocks of roughly 1.9 bb, but the analysts surveyed are estimating 1.603 bb of U.S. ending corn stocks in 2019-20. Perhaps they anticipate a lower corn yield from the September WASDE report as the demand side of the corn market is not looking bullish at the moment.
It remains remarkable at this point in early August that we can't confidently say whether the 2019 corn crop is closer to 13.0 bb or 14.0 bb, but that's exactly the situation we find ourselves in. The traditional narrowing of crop estimates that typically comes with USDA's June 30 Acreage report should finally arrive in Monday's report and carries potential for a big price response.
Because planting conditions in 2019 were unlike any other year, I cannot over-emphasize the level of uncertainty going into Monday's report. For that reason, I offer the following guidelines as to what we might expect from post-report corn prices.
First, the bearish possibility. If for some odd reason, USDA's corn planting estimate stays high and the corn crop estimate is near 14 bb, look for heavy noncommercial selling to follow. As of July 30, CFTC data shows noncommercials holding 241,659 contracts net long in corn, a large enough position to cause problems for prices in the event of a bearish report.
The bullish possibility, as I see it, will need 85 ma or less of corn plantings to bring the crop estimate under 13.0 bb. A crop below 13.0 bb should tighten corn supplies enough to cause some discomfort to those needing corn in the year ahead and keep new-crop corn prices supported above $4.00.
Anything in the middle ground, between 13.0 bb and 14.0 bb, will likely result in a roughly neutral price response by the market. However, there is still a risk of noncommercial selling if the numbers are not clearly bullish.
SOYBEANS
In the July WASDE report, USDA pegged the 2019 soybean crop at 3.845 bb, based on 80.0 ma planted and a yield of 48.5 bushels per acre (bpa). USDA's estimate of U.S. ending soybean stocks dropped to 795 million bushels (mb) for 2019-20.
In Monday's report, there is a chance of a modest increase in USDA's estimate of soybean acres, especially if corn acres are adjusted lower, as many of us suspect they will be. As with corn, the soybean yield may see a small downward adjustment as the good-to-excellent crop ratings for both remain the lowest in seven years. The more accurate soybean yield estimate will be seen in September.
I miss the days when good weather was the most bearish threat soybean prices faced, but here in August we can't talk about soybeans without mentioning how bearish trade relations with China have become. The latest turn of events has China stopping ag imports from the U.S. after President Donald Trump announced a new 10% tariff on $300 billion of Chinese goods, starting Sept. 1. China is also said to be considering new tariffs on U.S. goods.
Given the latest events, it is difficult to say if USDA will reduce its estimates of U.S. soybean demand on Monday, but the possibility certainly exists. Looking at Dow Jones' survey, analysts don't seem overly concerned and are anticipating only small changes to USDA's July estimates. For Aug. 12, analysts expect USDA to estimate a 3.783 bb soybean crop, based on a lower yield of 47.5 bpa. New-crop ending soybean stocks are expected to increase only slightly, from 795 mb to 818 mb for 2019-20.
Analysts also expect USDA to increase its estimate of world soybean stocks from 104.5 million metric tons (mmt) to 106.2 mmt (3.90 bb). A recent USDA attache report suggests USDA's estimates of China's soybean imports will be reduced for both the old-crop and new-crop seasons. However, final WASDE decisions don't always agree with recommendations from attache reports.
WHEAT
Wheat is the one crop that is not likely to see many surprises in Monday's new USDA estimates, but a big price response is still possible, depending on what happens to corn. Aside from corn, Dow Jones' survey expects USDA's estimate of U.S. ending wheat stocks to drop slightly, from 1.000 bb in July to 991 mb on Monday.
The U.S. wheat crop is expected to total 1.926 bb -- slightly higher than USDA's 1.921 bb estimate in July, with only minor tweaks to the various wheat categories. The anticipated drop in ending stocks is likely related to U.S. wheat shipments being up 25% early in 2019-20 from a year ago.
Analysts expect USDA to slightly reduce its estimate of world ending wheat stocks from July's 286.5 mmt to 284.7 mmt (10.46 bb) on Monday. Anything over the 281.06 mmt (10.33 bb) of ending stocks from 2017-18 will qualify as a new record and will keep bearish pressure on wheat prices.
It is also important to know where the wheat stocks are being held; to that point, USDA's July estimate said the top eight wheat exporters will have 2.23 bb of ending wheat stocks on hand at the end of 2019-20. That's roughly the same as the previous year and near the lowest surplus in six years.
This year continues to be unique for crops, but Monday's WASDE report should help shed some light on a mystery that has gone on too long. Join us Monday at noon CDT for a recap of USDA's latest estimates and what they mean for grain prices. I will also highlight any surprises and answer your questions.
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Join us Monday at noon CDT for DTN's post-report webinar where I will discuss USDA's estimates, discuss any surprises and answer your questions. Sign up for Monday's webinar at:
https://dtn.webex.com/…
| U.S. PRODUCTION (Million Bushels) 2019-20 |
| Aug | Avg | High | Low | Jul | 2018-19 |
| Corn | | 13,164 | 13,550 | 12,719 | 13,875 | 14,420 |
| Soybeans | | 3,783 | 3,960 | 3,633 | 3,845 | 4,554 |
| All Wheat | | 1926 | 1,990 | 1,873 | 1,921 | 1,884 |
| Winter | | 1295 | 1,330 | 1,270 | 1,291 | 1,184 |
| HRW | | 811 | 834 | 799 | 805 | 662 |
| SRW | | 256 | 259 | 250 | 259 | 286 |
| White | | 228 | 250 | 222 | 257 | 272 |
| Durum | | 58 | 70 | 53 | 58 | 77 |
| Other | 570 | 585 | 542 | 572 | 623 |
| U.S. AVERAGE YIELD (Bushels Per Acre) 2019-20 (WASDE) |
| Aug | Avg | High | Low | Jul | 2018-19 |
| Corn | | 165.3 | 167.4 | 162.0 | 166.0 | 176.4 |
| Soybeans | | 47.5 | 48.5 | 46.0 | 48.5 | 51.6 |
| U.S. ENDING STOCKS (Million Bushels) 2018-2019 |
| Aug | Avg | High | Low | Jul |
| Corn | | 2,392 | 2,490 | 2,220 | 2,340 |
| Soybeans | | 1,069 | 1,200 | 988 | 1,050 |
| U.S. ENDING STOCKS (Million Bushels) 2019-20 |
| Aug | Average | High | Low | Jul |
| Corn | | 1,603 | 1,900 | 1,297 | 2,010 |
| Soybeans | | 818 | 1,096 | 607 | 795 |
| Wheat | | 991 | 1,053 | 865 | 1,000 |
| WORLD ENDING STOCKS (Million metric tons) 2018-2019 |
| Aug | Avg | High | Low | Jul |
| Corn | | 329.5 | 332.0 | 326.0 | 328.8 |
| Soybeans | | 113.4 | 115.5 | 111.4 | 113.0 |
| Wheat | | 275.0 | 276.0 | 273.0 | 275.1 |
| WORLD ENDING STOCKS (million metric tons) 2019-20 |
| Aug | Avg. | High | Low | Jul |
| Corn | | 290.9 | 298.7 | 282.0 | 298.9 |
| Soybeans | | 106.2 | 124.1 | 101.0 | 104.5 |
| Wheat | | 284.7 | 290.0 | 282.0 | 286.5 |
Todd Hultman can be reached at todd.hultman@dtn.com
Follow Todd Hultman on Twitter @ToddHultman1
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