On Tuesday, May 12, the U.S. Department of Agriculture released its updated 2019 World Agricultural Supply and Demand Estimates report and gave us the first look at what could be in store for the grains for 2020. The report did hold a few surprises for the market. The question now is how much the numbers will be adjusted going forward.

For wheat, old crop ending stocks were estimated at 978 million bushels versus expectations of 969 million bushels and last month’s 970 million bushels. In general, old crop wheat numbers were neutral. For 2020, wheat ending stocks were estimated at 909 million bushels versus expectations of 818 million bushels, 807 million bushels from the Ag Outlook Forum, and 978 million bushels from last year. This is where the numbers turned negative for wheat.

World wheat old crop ending stocks were estimated at 295.1 million metric tons versus expectations of 291.8 million metric tons and 292.8 million metric tons from last month. Again, not bad, just a little negative. New crop world ending stocks were estimated at a new record 310.1 million metric tons versus expectations for 292.7 million metric tons and 295.1 million metric tons last year. This was very bearish for wheat as it would be the third year in a row of record world stocks.

The most anticipated numbers in the report were for corn. Surprisingly, they were not as bad as expected, at least for now. USDA did go with trend line yields and the 97 million acreage estimate from the Prospective Planting report, which would put corn production at a new record 15.995 billion bushels.

Old crop corn ending stocks were estimated at 2.098 billion bushels versus expectations of 2.261 billion bushels and last month’s estimate of 2.092 billion bushels. USDA resurveyed production from the states of Minnesota, South Dakota, Wisconsin, and Michigan and the result was a reduction in harvested acreage of 100,000 acres and yield drop of 0.2 bushels for a cut in production of 29 million bushels. This made the old crop corn numbers friendly.

New crop corn stocks were estimated at 3.318 billion bushels versus expectations of 3.42 billion bushels, 2.637 billion bushels from the Ag Outlook Forum, and 2.098 billion bushels last year. This would be the highest corn stocks since 1987, when stocks were 4.259 billion bushels and the national average price for corn was $2.57. Although new crop stocks were lower than expected, the number was still negative. But this is not likely the entire story for corn.

It is highly likely the May report gave us the largest production estimate for the year. Acreage was left unchanged from the Prospective Planting estimate in March and yield was left at trend. The last Crop Progress report is showing rapid planting progress in the Corn Belt, but awfully slow progress in the Northern Plains and Eastern Seaboard states as well as some states in the south. It is quite possible not all of the estimated 97 million acres of corn will be planted. Northern South Dakota, North Dakota, and western Minnesota are showing the worst planting progress, and it would not be a surprise if acreage drops by 3 million in this region. Weather has not been conducive for planting and the current forecasts continue to show rain showers every three to four days. The crop insurance final planting date for corn in most North Dakota counties is May 25 (May 31 for the southeast corner of North Dakota).

The drop in acreage will lower supply, but it is just as likely demand will see some reductions as well. USDA estimated a huge increase in feed demand (compared to Ag Outlook Forum) and it is likely that will be reduced in future reports along with exports and ethanol demand. On the bright side, ethanol demand has seen an increase the past two weeks as the country starts to reopen.

Corn’s old crop world ending stocks were estimated at 314.7 million metric tons versus expectations of 306.5 million metric tons and 303.2 million metric tons last month. New crop world corn ending stocks were estimated at 339.6 million metric tons versus expectation of 317.2 million metric tons and 314.7 million metric tons last year.

Soybean numbers were largely ignored prior to the report as most of the attention was focused on the corn numbers. But USDA did have a few surprises for soybeans. Old crop exports were cut 100 million bushels which was a surprise, especially with the past couple weeks of aggressive export sales to China. It has the trade concerned once again that China will not live up to their phase one trade deal commitments.

Old crop soybean stocks were estimated at 580 million bushels versus expectations of 497 million bushels and 480 million bushels last month. The old crop estimate was negative.

New crop soybean stocks were estimated at 405 million bushels versus expectations of 440 million bushels, 320 million bushels from the Ag Outlook Forum, and 580 million bushels last year. New crop numbers for soybeans were friendly. But like corn, it is likely the story for soybeans will change. With the likelihood of less corn and spring wheat acreage in the Northern Plains, soybean acreage will increase. This will result in increases to the production estimate in the months going forward.

Soybeans world old crop ending stocks were estimated at 100.3 million metric tons versus expectations of 99.8 million metric tons and 100.5 million metric tons last month. New crop world ending stocks for soybeans were estimated at 98.4 million metric tons versus expectations of 104.2 million metric tons and 100.3 million metric tons last year. World numbers were friendly.

The May 11 Crop Progress report was slightly friendly to the grains as planting progress was lower than expected. The report showed spring wheat planting at 42% completed versus expectations of 55%, corn planting at 67% completed versus expectations of 72%, and soybeans 38% planted versus expectations of 40%. Corn and soybeans continue to see rapid progress as both are ahead of the five-year average, while spring wheat is trailing behind its five-year pace. To add to the friendliness of the numbers, winter wheat conditions dropped 2% (1% more than expected) to 53% good/excellent.

Trade tensions continue to increase with China, and that has added to fears that China will not meet their phase one commitments. China has been criticized by multiple countries for their handling of the coronavirus outbreak. China retaliated against Australia by halting imports of meat from four plants and ceasing barley purchases. That is good for the U.S. as China has lifted U.S. barley import restrictions.

In a speech May 13, Federal Reserve Chairman Jerome Powell pulled no punches and gave a pessimistic view of the U.S. economy. The talk was bearish enough that it pushed the stock market lower for the session. Powell basically said this is a long-term problem and that Congress needs to throw more money into the economy before the damage becomes permanent.

Cattle’s performance this week was nothing short of disappointing, especially after seeing cash jump $10 to $15 late last Friday afternoon. Reports had March feeder cattle sale barn sales off 48% from last year. Sale barns supply feedlots with 50% of their supplies. Boxed beef prices continue to trade at record levels. USDA estimated 2020 beef production at 25.83 billion pounds, which is down 1.68 billion pounds from last month’s estimate. The reduction is because of a second quarter production drop of 1.255 billion pounds.

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