PF Reaction: Lower Corn, Soybean Crop Estimates Overshadowed by Changes to Carryover

Posted on 11/08/2018 12:17 PM

Market reaction

Ahead of USDA's report, corn futures were trading 2 to 3 cents higher, soybeans were 2 to 3 cents lower, wheat futures were narrowly mixed and cotton futures were 20 to 35 points higher.

 

In reaction to the reports, corn futures are down 3 to 4 cents, soybeans are 12 to 14 cents lower, wheat futures are mostly 3 to 6 cents lower and cotton futures are 20 to 45 points higher.

 

Crop production

Corn: 14.626 billion bu.; trade expected 14.721 billion bu.
— compares to 14.778 billion bu. in October; 14.604 billion bu. in 2017
Beans: 4.600 billion bu.; trade expected 4.676 billion bu.
— compares to 4.690 billion bu. in October; 4.392 billion bu. in 2017
Cotton: 18.408 million bales; trade expected 19.210 million bales
— compares to 19.763 million bales in October; 20.923 million bales in 2017

 

USDA cut its corn crop estimate by 152 million bu. from last month, which came in 95 million bu. below the average pre-report trade estimate. It cut the average corn yield 1.8 bu. to 178.9 bu. per acre. That would still be a record yield. Record yields are expected in 10 states — Alabama, Illinois, Indiana, Kentucky, Michigan, Nebraska, New York, Ohio, South Dakota and Tennessee.  

 

Across the Corn Belt, USDA estimates corn yields down from last month in Illinois (down 2 bu. to 210 bu. per acre), Iowa (down 6 bu. to 198 bu. per acre), Minnesota (down 7 bu. to 184 bu. per acre), South Dakota (down 6 bu. to 166 bu. per acre) and Wisconsin (down 2 bu. to 177 bu. per acre). USDA left yields unchanged from last month in Indiana (194 bu. per acre), Kansas (130 bu. per acre), Nebraska (195 bu. per acre) and North Dakota (146 bu. per acre). USDA increased yields in Michigan (up 3 bu. to 166 bu. per acre), Missouri (up 3 bu. to 145 bu. per acre) and Ohio (up 3 bu. to 193 bu. per acre).

 

USDA’s cut its soybean crop estimate by 90 million bu. from last month, which came in 76 million bu. below the average pre-report trade estimate. It reduced the national average soybean yield 1 bu. to 52.1 bu. per acre, though that would still be record-high. Record soybean yields are estimated in nine states – Illinois, Indiana, Kentucky, Mississippi, Nebraska, New York, Ohio, Pennsylvania and Virginia. USDA also cut harvested acres a modest 5,000 from last month.

 

In the major production states, USDA estimates yields down from last month in Illinois (down 2 bu. to 64 bu. per acre), Iowa (down 3 bu. to 58 bu. per acre), Michigan (down 1 bu. to 48 bu. per acre), Missouri (down 2 bu. to 46 bu. per acre), Nebraska (down 1 bu. to 61 bu. per acre), Ohio (down 1 bu. to 59 bu. per acre), South Dakota (down 1 bu. to 49 bu. per acre) and Wisconsin (down 1 bu. to 49 bu. per acre). USDA left yields unchanged in Indiana (60 bu. per acre), Kansas (42 bu. per acre), Minnesota (50 bu. per acre) and North Dakota (36 bu. per acre). The only major production state where USDA estimated a higher yield was Arkansas (up 2 bu. to 50 bu. per acre).

 

USDA slashed its cotton crop estimate by 1.355 million bales from last month, which came in 802,000 bales below the average pre-report estimate. USDA cut its cotton yield by 49 lbs. to 852 lbs. per acre. USDA also lowered its harvested acreage estimate by 151,000 acres to 10.374 million.  Georgia’s harvested acres were cut 70,000 acres from last month and its yield estimate was slashed 287 lbs. per acre after damage from Hurricane Michael.

 

U.S. carryover

Corn: 1.736 billion bu. for 2018-19; down from 1.813 billion bu. in October
Beans: 955 million bu. for 2018-19; up from 885 million bu. in October
Wheat: 949 million bu. for 2018-19; down from 956 million bu. in October
Cotton: 4.3 million bales for 2018-19; down from 5.0 million bales in October

 

USDA’s corn carryover projection of 1.736 billion bu. is 77 million bu. lower than last month and 37 million bu. under the average pre-report trade estimate. USDA cut total supplies by 152 million bu. from last month due to the smaller crop estimate. On the demand side of the balance sheet, it cut feed and residual use by 50 million bu. (to 5.500 billion bu.) and projected exports by 25 million bushels (to 2.450 billion bu.). USDA now projects the national average on-farm cash corn price at $3.20 to $4.00, up 20 cents on the bottom of the range and unchanged on the top end from last month.

 

USDA’s soybean ending stocks projection of 955 million bu. is up 70 million bu. from last month and 57 million bu. higher than the average pre-report estimate. On the supply side of the balance sheet, it cut total supplies 90 million bu. on the smaller crop estimate. It slashed total use 161 million bu. from last month, with projected exports down 160 million bu. (to 1.900 billion bu.), seed use down 7 million bu. (to 96 million bu.) and residual “use” down 2 million bushels (to 32 million bu.). That was only partially offset by a 10-million-bu. increase to projected crush (to 2.080 billion bu.).

 

USDA’s wheat carryover forecast at 949 million bu. is 7 million bu. lower than last month and 9 million bu. under the average pre-report estimate. The only change USDA made to its 2018-19 wheat balance sheet was a 7-milllion-bu. increase to seed use. That lowered projected ending stocks by a similar amount, which was 9 million bu. less than the average pre-report estimate. USDA now projects the average on-farm cash wheat price at $4.90 to $5.30, up a dime on the bottom end and down a dime on the top end of the range from October.

 

USDA’s cotton carryover projection of 4.3 million bales is down 700,000 bales from last month and around 300,000 bales below the average pre-report estimate. USDA slashed total supplies by 1.36 million bales due to the sharp reduction in crop size. That was only partially offset by smaller usage forecasts. USDA cut projected exports by 500,000 bales (to 15.0 million bales), domestic use by 100,000 bales (to 3.3 million bales) and unaccounted “use” by 60,000 bales (to 110,000 bales). USDA now projects the national average on-farm cash cotton price at 71 cents to 77 cents per lb., up 2 cents on the bottom end of the range and steady on the top end with last month.

 

Global carryover

Corn: 340.92 MMT for 2017-18; up sharply from 198.21 MMT in October
— 307.51 MMT for 2018-19; up sharply from 159.35 MMT in October
Beans: 99.69 MMT for 2017-18; up from 96.65 MMT in October
— 112.08 MMT for 2018-19; up from 110.04 MMT in October
Wheat: 279.00 MMT for 2017-18; up from 274.85 MMT in October
— 266.71 MMT for 2018-19; up from 260.18 MMT in October
Cotton: 80.39 million bales for 2017-18; down from 80.89 million bales in October
— 72.61 million bales in 2018-19; down 74.45 million bales in October

 

Global production highlights

Argentina beans: 37.8 MMT for 2017-18; compares to 37.8 MMT in October
— 55.5 MMT for 2018-19; compares to 57.0 MMT in October
Brazil beans: 119.8 MMT for 2017-18; compares to 119.5 MMT in October
— 120.5 MMT in 2018-19; compares to 120.5 MMT in October
Argentina wheat: 18.5 MMT for 2017-18; compares to 18.0 MMT in October
— 19.5 MMT in 2018-19; compares to 19.5 MMT in October
Australia wheat: 21.3 MMT for 2017-18; compares to 21.3 MMT in October
— 17.5 MMT in 2018-19; compares to 18.5 MMT in October
China wheat: 134.33 MMT for 2017-18; compares to 129.77 MMT in October
— 132.5 MMT in 2018-19; compares to 128.0 MMT in October
Canada wheat: 29.98 MMT for 2017-18; compares to 29.98 MMT in October
— 31.5 MMT in 2018-19; compares to 31.5 MMT in October
EU wheat: 151.26 MMT for 2017-18; compares to 151.68 MMT in October
— 137.6 MMT for 2018-19; compares to 137.5 MMT in October
Russia wheat: 84.99 MMT for 2017-18; compares to 84.99 MMT in October
— 70.0 MMT for 2018-19; compares to 70.0 MMT in October
Ukraine wheat: 26.98 MMT for 2017-18; compares to 26.98 MMT in October
— 25.0 MMT for 2018-19; compares to 25.5 MMT in October
China corn: 259.07 MMT for 2017-18; compares to 215.89 MMT in October
— 256.0 MMT for 2018-19; compares to 225.0 MMT in October
Argentina corn: 32.0 MMT for 2017-18; compares to 32.0 MMT in October
— 42.5 MMT for 2018-19; compares to 41.0 MMT in October
South Africa corn: 13.53 MMT for 2017-18; compares to 13.8 MMT in October
— 13.0 MMT for 2018-19; compares to 13.0 MMT in October
Brazil corn: 82.0 MMT for 2017-18; compares to 82.0 MMT in October
— 94.5 MMT for 2018-19; compares to 94.5 MMT in October
China cotton: 27.5 million bales for 2017-18; compares to 27.5 million bales in October
— 27.5 million bales for 2018-19; compares to 27.5 MMT in October

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