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Views and opinions: Trade analysts shocked by the latest USDA data

The USDA shocked trade by increasing its corn crop estimate. The USDA now pegs the U.S. corn yield at 169.5 bushels per acre and crop size at 13.9 billion bushels. While the yield was 3.5 bushels higher than the July estimate, crop size only increased 26 million bushels due to a reduction in acres.

Official planted corn acreage is now at 90 million for this year, down 1.7 million from the previous estimate; harvested corn acres now stand at 82 million. Given current demand, corn ending stocks are now projected at 2.36 billion bushels on old-crop and 2.18 billion for new-crop – both higher than the previous estimates.

Soybean data were more supportive. Yield was left unchanged on soybeans, at 48.5 bushels per acre, and crop size was reduced to 3.68 billion bushels after planted and harvested acres were cut. Planted acres on soybeans are reported at 76.7 million and harvested, at 75.9 million. These are both down from the June estimate, when a slight increase was predicted.

Ending stocks on soybeans are now projected at 1.07 billion bushels for 2018/19 and 755 million for 2019/20. While the new-crop estimate is a 40 million-bushel reduction from July, it is still an ample supply of soybeans.

Few changes took place to the domestic wheat balance sheet. Old-crop carryout held at 1.072 billion bushels and new-crop was bumped 14 million higher to 1.014 billion bushels. The 2019/20 wheat crop is estimated at 1.98 billion bushels, compared to 1.92 billion estimated in July.

The big shock in all these numbers came from acreage. Total prevent-plant acres in the United States this year now stands at 19.3 million, according to the Farm Service Agency. This is considerably higher than the 11 million from 2011.

While most interest in this report was on production, we did see some changes to demand. Corn demand was lowered 25 million bushels for ethanol and 100 million for exports. Soybean demand was reduced by 100 million bushels on exports as well, and another 4 million were taken away from seed demand.

Global balance sheets were also updated, and changes were more subtle. For the 2018/19 crop year world supplies were little changed, with 328.6 million metric tons on corn, 114.5 million tons for soybeans, and 275.5 million on wheat. For the new-crop marketing year, world ending stocks are estimated at 307.7 million tons of corn, 101.7 million of soybeans, and 285.4 million for wheat.

Corn reserves increased by 9 million metric tons from the previous estimate, soybeans declined 2.8 million, and wheat was lowered by 1.1 million. The concern with the revised world estimates is that year-to-year, both corn and soybean ending stocks are forecast to shrink.

Brazilian firms are starting to release more production estimates, as that country is preparing to start planting its 2019/20 crop. The estimate for soybean production is now at 126 million metric tons, compared to this year’s 116.8 million. Corn production is estimated at 104.3 million tons, up from this year’s 100 million.

Expansion to planted areas and ongoing favorable weather are the leading factors for the increases.

Trade is also monitoring early expectations for next year’s U.S. crop, mainly corn. Early indications are we will see corn planting rise next year as producers try to get back to normal rotations. These data are coming from suppliers who claim to be seeing higher corn input demand.

The same suppliers are also claiming to be seeing higher input demand on this year’s crops as farmers try to optimize yields on acres they managed to get planted as best they can.

More attention is being placed on U.S. crop maturity. The most interest has been on corn, where the crop is from 2-3 weeks behind its average progression. We are now starting to see more attention on soybeans as days start to shorten. Sunlight is a major factor for soybean production, with longer growing seasons being a great benefit to production in recent years.

The concern now is that not only will a shortened growing season impact yield, but possibly crop quality as well. For corn this can mean lighter test weights, especially if we see an end to the growing season from an early frost next fall. This same factor can cause green soybeans, which makes the oil unusable for some purposes, mainly food needs.

These are also factors that can impact what our commodities can be offered at in the global market.


Karl Setzer is Commodity Market Analyst for AgriVisor. His market commentary can be found on Twitter via @ksetzergrains

The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate.