Report Reaction: USDA's Corn, Bean Crop Estimates Buck the Trend and Drop Vs. September

Posted on 10/11/2018 11:31 AM

Market reaction

Ahead of USDA's report, corn futures were trading around 2 cents lower, soybeans were 2 to 3 cents lower, wheat futures were 1 to 2 cents lower and cotton futures were around 20 points lower.

In reaction to the report, corn futures are mostly 6 to 7 cents higher, soybeans are up a nickel, wheat futures are mixed with a slight downside bias and cotton futures are 20 to 50 points higher.

 

Crop production

Corn: 14.778 billion bu.; trade expected 14.872 billion bu.
— compares to 14.827 billion bu. in September; 14.604 billion bu. in 2017
Beans: 4.690 billion bu.; trade expected 4.733 billion bu.
— compares to 4.693 billion bu. in September; 4.392 billion bu. in 2017
Cotton: 19.763 million bales; trade expected 19.520 million bales 
— compares to 19.682 million bales in September; 20.923 million bales in 2017

USDA’s survey work for the October Crop Production Report likely caught some of the yield impacts from inclement weather across the Corn Belt and South. However, impacts from recent heavy rains and snow across the Corn Belt and hurricane/tropical storm damage in the South and Southeast will further be factored into the November Crop Production Report.

USDA lowered its corn crop estimate by 49 million bu. from last month, with the figure coming in 94 million bu. less than traders anticipated. Harvested acres were virtually unchanged from last month. USDA bucked the tendency to increase its October corn yield estimate in years when it has risen from August to September. USDA’s October corn yield estimate at 180.7 bu. per acre is down 0.6 bu. per acre from last month. USDA’s objective yield data showed a slight reduction in the number of ears per acre, though they still would be record-large. The implied ear weight increased modestly from last month and would be record-high.

Across the Corn Belt, USDA estimates yields down from last month in Illinois (down 2 bu. to 212 bu. per acre), Iowa (down 2 bu. to 204 bu. per acre), Kansas (down 1 bu. to 130 bu. per acre), Nebraska (down 3 bu. to 195 bu. per acre) and South Dakota (down 1 bu. to 172 bu. per acre). Yields are unchanged in Minnesota (191 bu. per acre) and Wisconsin (179 bu. per acre). USDA raised yields from last month in Indiana (up 2 bu. to 194 bu. per acre), Missouri (up 4 bu. to 142 bu. per acre), North Dakota (up 4 bu. to 146 bu. per acre) and Ohio (up 2 bu. to 190 bu. per acre). Record yields are forecast for Alabama, Illinois, Indiana, Iowa, Kentucky, Michigan, Nebraska, New York, Ohio, South Dakota, Tennessee and Wisconsin.

USDA’s October soybean crop estimate declined 3 million bu. from last month and came in 43 million bu. under the average pre-report estimate. The national average soybean yield was increased 0.3 bu. from last month to 53.1 bu. per acre. However, harvested acres were cut 514,000 from the previous estimate. USDA’s objective yield data showed a dramatic reduction in implied pod weights from last month, though there was a significant increase in the number of pods per acre to a record 1,900.

In the major production states, USDA estimates yields up from last month in Iowa (up 1 bu. to 61 bu. per acre), Kansas (up 1 bu. to 42 bu. per acre), Missouri (up 1 bu. to 48 bu. per acre), Ohio (up 2 bu. to 60 bu. per acre) and South Dakota (up 1 bu. to 50 bu. per acre). USDA left yields unchanged in Illinois (66 bu. per acre), Indiana (60 bu. per acre), Minnesota (50 bu. per acre), Michigan (49 bu. per acre), Nebraska (62 bu. per acre), North Dakota (36 bu. per acre) and Wisconsin (50 bu. per acre). USDA lowered yields from last month in Arkansas (down 2 bu. to 48 bu. per acre). Record yields are forecast in Alabama, Illinois, Indiana, Iowa, Kentucky, Mississippi, Nebraska, New York, Ohio, Pennsylvania, South Dakota and Tennessee.

USDA’s cotton crop estimate increased 81,000 bales from last month. Traders had anticipated a 162,000-bale decline. USDA increased the national average yield by 6 lbs. to 901 lbs. per acre. That more than offset a modest 29,000-acre cut to harvested acres from last month.  USDA increased its Texas yield by 22 lbs. per acre and its Georgia yield by 34 lbs. per acre.

 

U.S. carryover

Corn: 2.140 billion bu. for 2017-18; up from 2.002 billion bu. in September
— 1.813 billion bu. for 2018-19; up from 1.774 billion bu. in September
Beans: 438 million bu. for 2017-18; up from 395 million bu. in September
— 885 million bu. for 2018-19; up from 845 million bu. in September
Wheat: 956 million bu. for 2018-19; up from 935 million bu. in September
Cotton: 4.3 million bales for 2017-18; unch. from 4.3 million bales in September
— 5.0 million bales for 2018-19; up from 4.7 million bales in September

Corn carryover for the 2017-18 marketing year was set by the Sept. 1 Grain Stocks Report, pushing corn ending stocks up to 2.140 billion bu. for last year. That’s up 138 million bu. from the September Supply & Demand Report. USDA reduced total old-crop supplies 4 million bu. from last month with imports estimated down by that amount to 36 million bushels.

On the demand-side of the 2017-18 corn balance sheet, it estimates total corn use at 14.793 billion bu., down 142 million bu. from last month. Feed and residual old-crop use is now put at 5.302 billion bu., down 148 million bu. from last month. Food, seed and industrial use is now estimated at 7.054 billion bu., down 6 million bu. from last month. Those declines in domestic demand were partially offset by a 13-million-bu. increase in old-crop exports to 2.438 billion bushels.

USDA now puts the national average on-farm cash corn price for the 2017-18 marketing year at $3.36, down 4 cents from last month.

On new-crop corn, USDA estimates carryover at 1.813 billion bu., up 39 million bu. from last month, but 106 million bu. below the average pre-report trade estimate. The lower-than-expected carryover is the result of the smaller-than-expected corn crop estimate. USDA now estimates total new-crop supplies at 16.968 billion bu., up 89 million bu. from last month.

On the demand side, USDA puts total 2018-19 demand at 15.155 billion bu., up 50 million bu. from last month. USDA cut estimated feed & residual use by 25 million bu. (to 5.55 billion bu.) and left estimated FSI use unchanged from last month at 7.13 billion bu., including 5.65 billion bu. in corn-for-ethanol use. However, the department increased estimated exports 75 million bu. to 2.475 billion bushels.

USDA now puts the national average on-farm cash corn price for the 2018-19 marketing year at $3.00 to $4.00, unchanged from last month.

Soybean carryover for the 2017-18 marketing year was set by the Sept. 1 Grain Stocks Report, pushing soybean ending stocks up to 438 million bushels. That’s up 43 million bu. from the September S&D Report. In the Grain Stocks Report, USDA increased the 2017 bean crop to 4.411 billion bu., up 19 million bu. from the January Annual Production Summary. That pushed total supplies for 2017-18 up by that amount.

On the demand-side of the old-crop balance sheet for beans, USDA puts total use at 4.296 billion bu., down 25 million bu. from last month. Crush is unchanged at 2.055 billion bu. and exports are down just 1 million bu. from September at 2.129 billion bushels. Seed use is also unchanged at 104 million bushels. That leaves residual “use,” which is now estimated at 8 million bu., down 24 million bu. from last month.

USDA puts the national average on-farm cash soybean price for the 2017-18 marketing year at $9.33, down 2 cents from last month.

On new-crop beans, USDA estimates carryover at 885 million bu., up 40 million bu. from last month, but 13 million bu. below the average pre-report trade estimate. The lower-than-expected carryover is the result of the smaller-than-expected bean crop estimate. Total bean supplies for the 2018-19 marketing year are now estimated at 5.153 billion bu., the result of the increase in beginning stocks (last year’s carryover).

On the demand side of the new-crop soybean balance sheet, USDA made no changes from last month, leaving total use at 4.268 billion bushels. New-crop crush is estimated at 2.07 billion bu., exports are estimated at 2.06 billion bu., seed use is estimated at 103 million bu. and residual “use” is put at 34 million bushels.

USDA also left the estimated national average on-farm cash bean price unchanged from last month at $7.35 to $9.86.

USDA did some tweaking to the 2017-18 balance sheet for wheat. Total supplies are down 1 million bu. from last month, due to a 1-million-bu. cut to 2017-18 wheat production (1.740 billion bu.). On the demand side of the old-crop wheat balance sheet, USDA trimmed 1 million bu. from estimated seed use and added 2 million bu. to feed & residual use to push total use up 1 million bu. from last month. The end result is a 1-million-bu. cut to 2017-18 carryover to 1.099 billion bushels.

The national average on-farm cash wheat price from 2017-18 was unchanged from last month at $4.72.

On new-crop wheat, USDA puts carryover at 956 million bu., up 21 million bu. from last month and 6 million bu. above the average pre-report trade estimate. Beginning stocks for 2018-19 are down 1 million bu. from last month, but production is estimated up 6 million bu. from September. USDA also increased estimated imports by 5 million bu., to 140 million bushels. That pushes total wheat supplies for 2018-19 to 3.123 billion bu., up 11 million bu. from last month.

On the demand side of the wheat balance sheet, USDA cut total use 10 million bu., to 2.167 billion bushels. Estimated food use is unchanged from last month at 970 million bu. and seed use is also unchanged at 62 million bushels. However, USDA now estimates wheat feed and residual use at 110 million bu., down 10 million bu. from last month.

USDA now puts the national average on-farm cash wheat price at $4.80 to $5.40, up a dime on the bottom of the range and down a dime on the top of the range from last month.

Cotton carryover for the 2017-18 marketing year is unchanged from last month at 4.3 million bales. USDA made no changes to the supply- or demand-side of the old-crop balance sheet. The national average on-farm cash cotton price for 2017-18 was unchanged at 68 cents.

For 2018-19, cotton carryover is estimated at 5 million bales, up 300,000 bales from last month. Total supplies are up 80,000 bales for the 2018-19 marketing year on the increase in the crop estimate. On the demand-side of the new-crop balance sheet, USDA cut estimated exports 200,000 bales from last month, to 15.5 million bales. Unaccounted “use” was also cut 20,000 bales, to 170,000 bales.

USDA now puts the national average on-farm cash cotton price for the 2018-19 marketing year at 69 cents to 77 cents, down a penny on the bottom of the range and down 3 cents on the top of the range from September.

 

Global carryover

Corn: 198.21 MMT for 2017-18; up from 194.15 MMT in September
— 159.35 MMT for 2018-19; up from 157.03 MMT in September
Beans: 96.65 MMT for 2017-18; up from 94.74 MMT in September
— 110.04 MMT for 2018-19; up from 108.26 MMT in September
Wheat: 274.85 MMT for 2017-18; up from 274.36 MMT in September
— 260.18 MMT for 2018-19; down 261.29 MMT in September
Cotton: 80.89 million bales for 2017-18; down from 83.79 million bales in September
— 74.45 million bales in 2018-19; down 77.46 million bales in September

 

Global production highlights

Argentina beans: 37.8 MMT for 2017-18; compares to 37.8 MMT in September
— 57.0 MMT for 2018-19; compares to 57.0 MMT in September
Brazil beans: 119.8 MMT for 2017-18; compares to 119.5 MMT in September
— 120.5 MMT in 2018-19; compares to 120.5 MMT in September
Argentina wheat: 18.5 MMT for 2017-18; compares to 18.0 MMT in September
— 19.5 MMT in 2018-19; compares to 19.5 MMT in September
Australia wheat: 21.3 MMT for 2017-18; compares to 21.3 MMT in September
— 18.5 MMT in 2018-19; compares to 20.0 MMT in September
China wheat: 129.77 MMT for 2017-18; compares to 129.77 MMT in September
— 128.0 MMT in 2018-19; compares to 128.0 MMT in September
Canada wheat: 29.98 MMT for 2017-18; compares to 29.98 MMT in September
— 31.5 MMT in 2018-19; compares to 31.5 MMT in September
EU wheat: 151.68 MMT for 2017-18; compares to 151.68 MMT in September
— 137.5 MMT for 2018-19; compares to 137.5 MMT in September
Russia wheat: 84.99 MMT for 2017-18; compares to 84.99 MMT in September
— 70.0 MMT for 2018-19; compares to 71.0 MMT in September
Ukraine wheat: 26.98 MMT for 2017-18; compares to 26.98 MMT in September
— 25.5 MMT for 2018-19; compares to 25.5 MMT in September
China corn: 215.89 MMT for 2017-18; compares to 215.89 MMT in September
— 225.0 MMT for 2018-19; compares to 225.0 MMT in September
Argentina corn: 32.0 MMT for 2017-18; compares to 32.0 MMT in September
— 41.0 MMT for 2018-19; compares to 41.0 MMT in September
South Africa corn: 13.53 MMT for 2017-18; compares to 13.8 MMT in September
— 13.0 MMT for 2018-19; compares to 13.0 MMT in September
Brazil corn: 82.0 MMT for 2017-18; compares to 82.0 MMT in September
— 94.5 MMT for 2018-19; compares to 94.5 MMT in September
China cotton: 27.5 million bales for 2017-18; compares to 27.5 million bales in September
— 27.5 million bales for 2018-19; compares to 27.5 MMT in September

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