USDA surprises trade with yield expectations
The wheat markets were lower after higher U.S. production numbers in the monthly World Agricultural Supply and Demand Estimates report Aug. 12. All U.S. wheat production is expected to be 1.98 billion bushels versus the average estimate of 1.926 billion bushels. U.S. carryout is expected to be 1.014 billion bushels for 2019-20 versus the pre-report estimate of 991 million bushels. The hard red winter wheat crop was much higher than expected at 840 million bushels versus the average guess of 811 million bushels. Spring wheat was also higher than expected at 597 million bushels versus the average guess of 570 million bushels. Other wheat classes were close to pre-report estimates. Soft red came in at 257 million bushels and durum at 57 million bushels.
World ending stocks came in close to average estimates at 275.5 million metric tons for 2018-19 and 285.4 million metric tons for 2019-20. The only notable world revisions were a 1.3 million metric tons cut to European Union wheat production to 150 million metric tons and a 1.2 million metric tons cut to Russian wheat production to 73 million metric tons.
Strategie Grains increased the European Union soft red crop estimate by 2.3 million metric tons to 142.9 million metric tons. This compares to 127.1 million metric tons last year. They also raised export estimates by 2.9 million metric tons to 24.8 million metric tons versus 21 million metric tons last year. The German fam cooperatives association estimates its wheat crop at 23.8 million metric tons, 15% higher than last year.
Wheat export sales were at the upper end of market expectations at 462,000 metric tons (17 million bushels). Total commitments of 362 million bushels are up 18% from last year. Egypt tendered for an unspecified amount of wheat for the last half of September shipment. Russia and the Ukraine were the lowest offers with no U.S. wheat being offered. Weekly export inspections were also good totaling 25.3 million bushels. Inspections are running 28% ahead of last year at 181.3 million bushels.
Spring wheat conditions declined 4% to 69% good to excellent. Trade was expecting 72%. Spring wheat harvest is 8% complete versus 11% expected and 30% for the five-year average.
For the week ending Aug. 15, September contracts for Minneapolis wheat were down 17 cents at $5.0275, down 30.5 cents at $4.69 for Chicago wheat, and down 27.25 cents at $3.8975 for Kansas City wheat.
The U.S. Department of Agriculture came out with a surprisingly bearish report this week and killed the corn market. Just when we thought the USDA couldn't hurt farmers any worse than the June report, the USDA said hold my beer and watch this! Corn futures quickly locked limit down on Monday and stayed there into the close. There were over 100,000 long contracts trying to get out of their September and December positions after it went limit down. There are a lot of questions about how the National Agricultural Statistics Service of the USDA got the numbers they did, but I'm not sure we will ever get a good answer.
The USDA only lowered planted corn acres 1.7 million acres to 90 million acres and have harvested acres at 82 million acres, which would be slightly more than last year?!?! They also raised the yield 3.8 bushels per acre to 169.5 bushels per acre versus average pre-report estimates of 165.5 bushels per acre. Last year's yield was 176.4 bushels per acre and 97% of the crop was planted by June 3. This year, only 67% of the U.S. corn crop was planted by June 2 and only 92% of intended acres were planted by June 16.
Did the late May rally and the May 31 Market Facilitation Program payment announcement encourage that many farmers to plant corn in June after their last plant dates and into poor conditions? This would have been after they claimed prevented planting on intended corn and soybean acres, or they didn't apply for prevented planting and are just basically going without much of an insurance guarantee.
The FSA released data privately from the WASDE report and reported that there was 11.21 million acres of prevented planting corn acres reported by farmers. The old record for corn prevented planting acres was 3.6 million in 2013. The question everybody is trying to figure out is if you add the FSA's 11.2 million prevented planting acres to WASDE's 90 million planted acres, the USDA is trying to tell us U.S. farmers were initially planning on planting 101.2 million acres of corn this year? That is news to us, and if so, then why is this the first we are hearing about this? That also means more than 40 million acres were planted after May 26 across the U.S., and more corn was planted late onto prevented planting acres. But yet they raised the yield??? The FSA in a separate report said farmers enrolled 85.871 million acres into U.S. crop subsidy programs including failed acres for 2019.
The USDA bumped production up 26 million bushels to 13.9 billion bushels for the 2019 crop year. This raised 2019-20 ending stocks to 2.181 billion bushels, up from 2.01 billion bushels in July. This was nowhere near the private pre-report average estimates of 1.605 billion bushels. This was also 281 million bushels higher than the highest private estimate. The USDA lowered corn use for ethanol 25 million bushels for the 2019-20 marketing year. They also lowered export demand by 100 million bushels to 2.05 billion bushels due to increased competition from global markets.
It was also reported that 31 small refinery waivers were granted by the Environmental Protection Agency for the 2018 Renewable Fuel Standard compliance year. This exempts an estimated 1.43 billion gallons of renewable fuel, second only to the 1.8 billion gallons exempted in 2017. Only six applications were denied. It seems to me the EPA and the USDA are in a contest to see who can bankrupt the most farmers.
The Pro Farmer's tour Aug. 19-22 will estimate both regional and state level corn and soybean yields. This tour may give us a better idea of what is out there and if they think the USDA is in the ballpark. It may be hard for them to get good estimates this year with the late crop, but it is another source to watch. This crop still has potential to be OK with the mild summer we have had, but it will take a late fall to get much of this crop to maturity.
Soybean futures did not get near as beat up as much as the corn market this week, but we still saw losses for the week as of the Aug. 15 close. It was a relatively neutral report for soybeans as they lowered acres again but kept yield unchanged.
The USDA said farmers planted 76.7 million acres of soybeans versus 80 million acres in USDA's July report. They kept the yield unchanged at 48.5 bushels per acre versus 51.6 bushels per acre for the 2018 soybean crop. This puts production at 3.68 billion bushels, 19% below last year and at the low end of trade expectations. South Dakota and Ohio saw the largest reductions from their intended acres. The FSA reported 4.351 million prevent acres for soybeans. There was a total of 19 million acres reported for prevented planting across the nation for all crops.
Acres that were intended to get planted this spring were probably switched over to corn prevented planting acres as there was a higher prevented planting guarantee for corn than soybeans. Corn may have also been planted as a cover crop over soybeans because you can chop corn for silage and you wouldn't think there is much incentive to forage soybeans. The government incentivized planting anything this year to get a Market Facilitation Program payment, so they basically doomed the markets on May 31. But it still doesn't explain why the USDA doesn't seem to think yields are affected by planting a crop two to four weeks late and into poor conditions!?!?
Ending stocks for 2019-20 are at 755 million bushels, 40 million bushels less than the USDA's July number and below the trades pre-report average guess of 818 million bushels. Export estimates for 2019-20 were lowered 100 million bushels, though. World ending stocks of 2019-20 were lowered to 101.7 million metric tons versus the USDA's July estimate of 104.5 million metric tons.
Crop ratings remained unchanged at 54% good to excellent compared to 66% good to excellent last year. The crop is rated 33% fair and 13% is rated poor. Average analyst estimates were expecting unchanged or a decrease of 1% ratings.
Soybeans blooming came in at 82% versus 93% for the five -year average and 95% last year. Soybeans setting pods came in at 54% versus 76% for the five-year average and 83% last year.
The only thing that seems to matter is when it will start cooling down low enough to give us frost scare potential, but we are at least a month away from that on a normal year. Weather has been relatively mild this summer, and soybeans seem to like the cool wet weather a lot better than hot and on the dry side. But cool weather in early September could bring frost scares.
For the week ending Aug. 8, the USDA reported a decrease of 4 million bushels of soybean export sales for 2018-19 and an increase of 30 million bushels for 2019-20. Soybean export commitments now total 1.788 billion bushels in 2018-19 and are down 17% from a year ago. The National Oilseed Processors Association's monthly soybean crush data for July was supportive, as the crush was higher than expected and soybean oil stocks were sharply lower than expected.
November soybeans are still trending downward and are at risk of filling a trade gap that was made in May. This was and still is first support as the bottom end of the gap was left in November soybean futures at $8.58 to $8.645 on May 25. The November contract low of $8.155 set on May 13 recovery is major support after this.
Major resistance is at $9.3125 on the weekly chart. On the daily charts, resistance is $9.365 and then the five-month high of $9.48 for new crop soybeans that was set on June 18.
For the week ending Aug. 15, November canola was down $2.90 at $451.20 Canadian per metric ton. The Canadian dollar was down .0064 at 0.7512. This brings the U.S. price to $15.37 per hundredweight.
• Velva, N.D., $14.16 per hundredweight, September at $14.16.
• Enderlin, N.D., no bid, September at $14.16.
• Hallock, Minn., $14.52 per hundredweight, September at $14.69.
• Fargo, N.D., $14.55 per hundredweight, September at $14.25.
Cash feed barley bids in Minneapolis were at $3, while malting barley received no quote. Berthold, N.D., bid is $2.75 and CHS Southwest New Salem, N.D., has no bid.
Cash bids for milling quality durum are $4.60 in Berthold and at $4.70 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $18.50, with October bids at $17.40.
For the week ending Aug. 15, soybean oil was down 51 cents at $29.07 on the September contract.