PF Reaction: USDA's Corn Crop And Winter Wheat Acreage Pegs Top Expectations

Posted on 01/12/2018 11:49 AM

Market reaction

Ahead of USDA's reports, corn futures were trading around unchanged, soybeans were 2 to 3 cents lower, winter wheat futures were 1 to 2 cents higher, spring wheat futures were 1 to 2 cents lower and cotton futures were 80 to 110 points lower.

In reaction to the reports, corn futures are now trading around 2 cents lower, soybeans are 3 to 5 cents higher, wheat futures are mostly 10 to 14 cents lower and cotton futures are 135 to 155 points lower.

Pro Farmer Editor Brian Grete outlines the reports:

 

Annual Production Summary

Corn: 14.604 billion bu.; trade expected 14.579 billion bu.
-- compares to 14.578 billion bu. in November; 15.148 billion bu. in 2016
Beans: 4.392 billion bu.; trade expected 4.427 billion bu.
-- compares to 4.425 billion bu. in November; 4.307 billion bu. in 2016
Cotton: 21.263 million bales; trade expected 21.36 million bales
-- compares to 21.377 million bales in December; 17.2 million bales in 2016

USDA added another 1.0 bu. to the national average corn yield, lifting it to 176.6 bu. per acre. For the first time, USDA’s corn yield in the Annual Production Summary is above the “all-sample” calculated corn yield from the Pro Farmer Midwest Crop Tour. That’s a strong signal the technology and management have moved out in front of “traditional” yield sampling, something we’ll keep in mind when we hit the road in August 2018.

The final production estimate is 25 million bu. above the average pre-report trade estimate and is up just 26 million bu. from the November crop estimate. Harvested corn acres were cut 416,000 from November, trimming the impact of the higher yield.

Looking at the state-by-state yields, USDA cut the corn yield in Indiana (down 1 bu., to 180 bu. per acre), Kansas (down 4 bu., to 132 bu.), Michigan (down 8 bu., to 159 bu.), Missouri (down 5 bu., to 170 bu.) and South Dakota (down 5 bu., to 145 bu. per acre). Yield increases from November were recorded in Illinois (up 3 bu., to 201 bu. per acre), Iowa (up 5 bu., to 202 bu.), Minnesota (up 4 bu., to 194 bu.), Nebraska (up 2 bu., to 181 bu.), North Dakota (up 5 bu., to 139 bu.), Ohio (up 4 bu., to 177 bu.) and Wisconsin (up 8 bu., to 174 bu. per acre).

USDA cut 0.4 bu. from the national average soybean yield, dropping it to 49.1 bu. per acre. The final production estimate for soybeans is 33 million bu. from November and is 35 million bu. below the average pre-report trade estimate. Some of that yield decline was partially offset by a 51,000-acre increase in harvested bean acres.

USDA cut the bean yield in Indiana (down 1 bu., to 54 bu. per acre), Kansas (down 3 bu., to 37 bu.), Michigan (down 2.5 bu., to 42.5 bu.), Nebraska (down 0.5 bu., to 57.5 bu.), North Dakota (down 1 bu., to 34 bu.), Ohio (down 1.5 bu., to 49.5 bu.) and South Dakota (down 2 bu., to 43 bu. per acre). Yield increases were recorded in Arkansas (up 1 bu., to 51 bu. per acre), Iowa (up 0.5 bu., to 56.5 bu.), Minnesota (up 1 bu., to 47 bu.) and Wisconsin (up 1 bu., to 47 bu. per acre). Yields were held steady in Illinois (58 bu.) and Missouri (49 bu. per acre).

USDA now puts the national average cotton yield at 899 lbs. per acre, down 3 lbs. from last month. The cotton crop estimate is 114,000 bales below the December estimate and is about 337,000 bales below the average pre-report trade estimate. USDA cut harvested cotton acres 56,000 from last month.

The big cut to state yields came in Georgia (down 32 lbs., to 850 lbs.) with the Texas cotton yield up 6 lbs., to 793 lbs. per acre.

Quarterly Grain Stocks

Corn: 12.516 billion bu.; trade expected 12.431 billion bu.
-- compares to 2.295 billion bu. Sept. 1; 12.386 billion bu. Dec. 1, 2016
Beans: 3.157 billion bu.; trade expected 3.181 billion bu.
-- compares to 301 million bu. Sept. 1; 2.898 billion bu. Dec. 1, 2016
Wheat: 1.874 billion bu.; trade expected 1.849 billion bu.
-- compares to 2.253 billion bu. Sept. 1; 2.077 billion bu. Dec. 1, 2016

Dec. 1 corn stocks in all positions came in 85 million bu. above the average pre-report trade estimate and are a record for the quarter. Of the total stocks, 7.74 billion bu. are stored on-farm (up 2% from year-ago) and off-farm stocks are 4.78 billion bu., up slightly from year-ago. The September through November 2017 indicated disappearance is 4.38 billion bu., down 2.7% from the same quarter last year.

Dec. 1 soybean stocks in all positions came in 24 million bu. below the average pre-report trade guess, but are still a record for the quarter. Beans stored on-farm totaled 1.49 billion bu., up 11% from year-ago. Off-farm stocks of 1.67 billion bu. are up 7% from last year. Indicated disappearance for September through November 2017 totaled 1.54 billion bu., down 4% from the same quarter last year.

Dec. 1 wheat stocks in all positions came in 25 million bu. above the average pre-report trade estimate. On-farm wheat stocks are estimated at 393 million bu., down 31% from year-ago. Off-farm stocks at 1.48 billion bu. are down 2% from last year. The September through November 2017 indicated disappearance is 393 million bu., down 16% from the same quarter last year.

Winter Wheat Seedings

All winter wheat: 32.6 mil. acres; trade expected 31.307 mil. acres
-- compares to 32.696 mil. acres in 2016
HRW: 23.1 mil. acres; trade expected 22.327 mil. acres
-- compares to 23.426 mil. acres in 2016
SRW: 5.98 mil. acres; trade expected 5.555 mil. acres
-- compares to 5.733 mil. acres in 2016
White winter: 3.56 mil. acres; trade expected 3.435 mil. acres
-- compares to 3.537 mil. acres in 2016

Winter wheat seedings are down just 88,000 from last year. That’s “shocking,” with the tally about 1.3 million acres above the average pre-report trade estimate. This number is going to leave a lot of uncertainty in the market. The Pro Farmer/Doane survey indicated winter wheat acres would be down about 8% from year-ago. This will make it difficult to generate upside momentum in wheat futures, but it does cut the odds that last-year’s winter wheat acres in the Central Plains will go to either corn or soybeans in 2018.

 

U.S. carryover

Corn: 2.477 billion bu. for 2017-18; up from 2.437 billion bu. in December
Beans: 470 million bu. for 2017-18; up from 445 million bu. in December
Wheat: 989 million bu. for 2017-18; up from 960 million bu. in December
Cotton: 5.7 million bales for 2017-18; down from 5.8 million bales in December

Corn carryover is up 40 million bu. from last month and is 46 million bu. above the average pre-report trade estimate. USDA increased supplies 25 million bu. on the bigger crop estimate and slightly lower beginning stocks. On the demand side, USDA trimmed 25 million bu. from feed & residual use (5.550 billion bu.) and increased food, seed & industrial use 10 million bushels (6.995 billion bu.). Corn-for-ethanol use (a component of FSI) was unchanged at 5.525 billion bushels. USDA now puts the national average on-farm cash corn price at $2.95 to $3.55, up a dime on the bottom end and steady on the top end compared to last month.

Bean carryover is up 25 million bu. from last month, but is 2 million bu. below the average pre-report trade estimate. Total supplies were cut 34 million bu., due to the smaller crop and slightly bigger beginning stocks. On the demand side, USDA slashed exports 65 million bu. (to 2.160 billion) and cut residual use by 2 million bushels (to 33 million bu.). That was partially offset by a 10-million-bu. increase in estimated crush (1.95 billion bu.). USDA now puts the national average on-farm cash bean price at $8.80 to $9.80, up 20 cents on the bottom and down 20 cents on the top-end from last month.

Wheat carryover is up 29 million bu. from last month and is 30 million bu. above the average pre-report trade estimate. Total supplies were increased 5 million bu. on bigger imports. On the demand side, USDA cut feed & residual use 20 million bu. (to 100 million bu.) and trimmed seed use 4 million bushels (to 62 million bu.). USDA now puts the national average on-farm cash wheat price at $4.50 to $4.70, unchanged from last month.

Cotton carryover was cut 100,000 bales from last month. Total supplies were cut 180,000 bales on the smaller crop estimate. On the demand side, USDA cut unaccounted use by 80,000 bales. USDA now puts the national average on-farm cash cotton price at 67 cents to 71 cents, up 4 cents on the bottom and up 2 cents on the top-end of the range from last month.

Global carryover

Corn: 228.75 MMT for 2016-17; up from 227.34 MMT in December
-- 206.57 MMT for 2017-18; up from 204.08 MMT in December
Beans: 96.49 MMT for 2016-17; down from 96.62 MMT in December
-- 98.57 MMT for 2017-18; up from 98.32 MMT in December
Wheat: 252.72 MMT for 2016-17; down from 255.33 MMT in December
-- 268.02 MMT for 2017-18; down from 268.42 MMT in December
Cotton: 87.64 million bales for 2016-17; down from 87.65 million bales in December
-- 87.79 mil. bales for 2017-18; down from 88.0 mil. bales in December

 

Global production highlights

Argentina beans: 57.8 MMT for 2016-17; compares to 57.8 MMT in December
-- 56.0 MMT for 2017-18; compares to 57.0 MMT in December
Brazil beans: 114.1 MMT for 2016-17; compares to 114.1 MMT in December
-- 110.0 MMT for 2017-18; compares to 108.0 MMT in December
Argentina wheat: 18.4 MMT for 2016-17; compares to 18.4 MMT in December
-- 17.5 MMT for 2017-18; compares to 17.5 MMT in December
Australia wheat: 30.36 MMT for 2016-17; compares to 33.5 MMT in December
-- 21.5 MMT for 2017-18; compares to 21.5 MMT in December
China wheat: 128.85 MMT for 2016-17; compares to 128.85 MMT in December
-- 130.0 MMT for 2017-18; compares to 130.0 MMT in December
Canada wheat: 31.73 MMT for 2016-17; compares to 31.73 MMT in December
-- 30.0 MMT for 2017-18; compares to 30.0 MMT in December
EU wheat: 145.25 MMT for 2016-17; compares to 145.25 MMT in December
-- 151.6 MMT for 2017-18; compares to 152.5 MMT in December
FSU-12 wheat: 130.48 MMT for 2016-17; compares to 130.48 MMT in December
-- 141.27 MMT for 2017-18; compares to 139.27 MMT in December
Russia wheat: 72.53 MMT for 2016-17; compares to 72.53 MMT in December
-- 85.0 MMT for 2017-18; compares to 83.0 MMT in December
China corn: 219.55 MMT for 2016-17; compares to 219.55 MMT in December
-- 215.89 MMT for 2017-18; compares to 215.89 MMT in December
Argentina corn: 41.0 MMT for 2016-17; compares to 41.0 MMT in December
-- 42.0 MMT for 2017-18; compares to 42.0 MMT in December
South Africa corn: 17.48 MMT for 2016-17; compares to 17.48 MMT in December
-- 12.5 MMT for 2017-18; compares to 12.5 MMT in December
Brazil corn: 98.5 MMT for 2016-17; compares to 98.5 MMT in December
-- 95.0 MMT for 2017-18; compares to 95.0 MMT in December
China cotton: 22.75 mil. bales for 2016-17; compares to 22.75 mil. bales in December
-- 26.4 mil. bales for 2017-18; compares to 25.0 million bales in December

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