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USDA estimating less crop stock for new market year



WASHINGTON, D.C. — U.S. and global ending stocks for corn, soybeans and wheat are forecast to be down for 2018/19, according to latest numbers from the USDA.

Meanwhile, smaller U.S. winter wheat, corn and soybean crops are expected. The USDA released its monthly World Agricultural Supply and Demand Estimates (WASDE) and Crop Production reports May 10.

Ending stocks for U.S. corn are forecast to be 1.7 billion bushels, down 500 million from last year. Soybean stocks are expected to drop 115 million bushels to 415 million. For all wheat, stocks are anticipated to be 955 million bushels, down 115 million. If realized, wheat ending stocks would be a four-year low, USDA said.

Jon Cavanaugh, a private analyst and former marketing director for Central States Enterprises, said he first checked corn supply and demand numbers after the reports were released.

“We’ll have reduced acres this year and with a more typical yield, we’ll produce less corn than demand,” he noted. “Carryover will be reduced. The 500 million-bushel decline in corn carryover next year over this year makes this bullish for corn.”

Worldwide, Brazil has become a more significant exporter of corn over the last 10 years, Cavanaugh said. “Last year, they had a huge corn crop. This year, their crop is being stressed. They’ve dropped production numbers by 5 million (metric) tons.”

Globally, corn use is expected to grow 2 percent, USDA stated. Production is forecast to be up, with the biggest increases for Argentina, Brazil, China, Russia and Ukraine. Global ending stocks are projected to be down 36 million tons from a year ago. If realized, ending stocks would be the lowest since 2012/13.

Soybean production worldwide is expected to jump nearly 18 million tons, to 355 million. Global endings stocks are projected to be about 87 million tons, down 5.5 million.

A potential trade war with China over tariffs imposed – or threatened – by U.S. and Chinese officials could impact the soybean market, Cavanaugh said.

“If China buys fewer U.S. soybeans, that could be negative to the market,” he explained. “Soybean prices have dropped sharply in the last couple of weeks and that’s primarily due to concerns over tariffs. Trade war talk is quite negative to soybeans.”

He is concerned about the impact of a trade war on soybean prices next year if the spat drags on. “If we’re in a trade war and Argentina and Brazil have normal production next year, that could be where we see the real brunt of lower prices,” he noted. “If (Argentina and Brazil) bounce back with normal yields, and with a trade war, that could hurt our prices and farmers.”

China may look for other options if a trade war develops, but when all is said and done, they’ll need U.S. soybeans, said Jon Marcus, principal at Lakefront Futures & Options LLC, based in Chicago.

“Nobody knows for sure what’s going to happen,” he said. “But if you go off past situations, China may behave like a petulant child. It will turn its head, walk away and stomp its feet, but at the end of the day, they need to come to dinner. They’ll take a stand, making us nervous. But eventually, they’ll need to come to us.”

Wheat ending stocks worldwide are expected to drop 6 million tons to 264 million. Global wheat production is anticipated to be 748 million tons, a decline of nearly 11 million.

“Wheat numbers were still pretty high,” Marcus said. “There’s always plenty of wheat.”

In the WASDE report, USDA projects season-average farm prices of $3.30-$4.30 for corn, $8.75-$11.25 for soybeans and $4.50-$5.50 for wheat.

U.S. production, acreage

Winter wheat production, as of May 1, was estimated to be 1.2 billion bushels, a drop from last year’s 1.3 billion, according to USDA. The average yield of 48 bushels per acre was down from last year’s 50 bushels.

Producers were expected to harvest nearly 25 million acres, a drop of 2 percent from last year. If realized, this would be a record low harvested acreage for the United States, the agency stated.

Farmers are projected to plant 88 million acres of corn, down from last year’s 90 million. USDA expects nearly 89 million acres of soybeans, a decline from 90 million last year. Corn production is anticipated to be 14 billion bushels, down from 14.6 billion. For soybeans, production is expected to be 4.3 billion bushels, down from 4.4 billion.

Marcus said he’s not sure what farmers are doing with acreage previously devoted to corn, soybeans and wheat. “I doubt they’d let it lie dormant,” he pointed out. “They may be using cover crops to work the soil for next year.”

There’s been a definite shift to more soybeans than corn, Cavanaugh said. “But the real concern now is not acreage, but the concern going forward is simply yield.

“Corn planting is going very well so far. A few weeks ago, we were cold and wet, but things have changed. I’m amazed at how quickly it turned around. Because corn planting is going so well, I wouldn’t be surprised to see more corn acres than projected.”