Report Reaction: Bullish Response to USDA's June Crop Reports

Posted on 06/12/2018 11:41 AM

Market reaction

Ahead of USDA's report, corn futures were trading 4 to 5 cents higher, soybeans were 3 to 4 cents higher, winter wheat futures were 2 to 3 cents higher, spring wheat futures were around a penny lower and cotton futures were mostly 60 to 105 points higher.

After the reports, corn futures are trading 9 to 10 cents higher, soybeans are 5 to 6 cents higher, winter wheat futures are 14 to 19 cents higher, spring wheat is 5 to 7 cents higher and cotton is 90 to 115 points higher.

 

Winter wheat production

All wheat: 1.827 billion bu.; trade expected 1.822 billion bu.
— compares to 1.821 billion bu. in May; 1.741 billion bu. in 2017
All winter wheat: 1.198 billion bu.; trade expected 1.190 billion bu.
— compares to 1.192 billion bu. in May; 1.269 billion bu. in 2017
HRW: 650 million bu.; trade expected 645 million bu.
— compares to 647 million bu.; 750 million bu. in 2017
SRW: 316 million bu.; trade expected 318 million bu.
— compares to 315 million bu. in May; 292 million bu. in 2017
White winter: 232 million bu.; trade expected 228 million bu.
— compares to 229 million bu. in May; 227 million bu. in 2017

In the production report, USDA made no change to winter wheat harvested acres, which will leave some crop-watchers looking for a cut in upcoming production reports. USDA upped the national average winter wheat yield by 0.3 bu. per acre to 48.4 bu. per acre. It put the all-wheat yield at 46.9 bu. per acre, up 0.1 bu. per acre from last month. The implied spring wheat crop is 629 million bu., unchanged from last month.

USDA made no changes to yields in Kansas, Oklahoma or Texas compared to last month. Crop-watchers tell us the HRW yield could move up in upcoming reports, but only if the harvested area is reduced by way of higher abandonment.

 

U.S. carryover

Corn: 2.102 billion bu. for 2017-18; down from 2.182 billion bu. in May
— 1.577 billion bu. for 2018-19; down from 1.682 billion bu. in May
Beans: 505 million bu. for 2017-18; down from 530 million bu. in May
— 385 million bu. for 2018-19; down from 415 million bu. in May
Wheat: 1.080 billion bu. for 2017-18; up from 1.070 billion bu. in May
— 946 billion bu. for 2018-19; down from 955 million bu. in May
Cotton: 4.2 million bales for 2017-18; down from 4.7 million bales in May
— 4.7 million bales for 2018-19; down from 5.2 million bales in May

For old-crop corn, USDA cut 5 million bu. from estimated imports, dropping total supply by that amount. On the demand side, USDA pumped up expected exports by 75 million bu., driving the tally to 2.3 billion bushels. The end result was an 80-million-bu. cut to estimated old-crop corn carryover, which is 64 million bu. below the average pre-report trade estimate. USDA left the national average on-farm cash corn price unchanged from last month at $3.25 to $3.55.

On new-crop corn, the 80-million-bu. drop in beginning stocks cut total supplies by that amount. On the demand side, USDA cut estimated Feed & Residual use 25 million bu. (to 5.35 billion bu.), but that cut was more than offset by a 50-million-bu. increase in Food, Seed & Industrial use (to 7.165 billion bu.). All of the increase in FSI went to corn-for-ethanol use, which is now put at 5.675 billion bushels. These changes resulted in a 105-million-bu. cut in projected carryover to 1.577 billion bushels. That’s 86 million bu. below the average pre-report trade estimate. USDA puts the national average on-farm cash corn price for 2018-19 at $3.40 to $4.40, up a dime on both ends of the range from last month.

For 2017-18 soybeans, USDA upped its crush estimate by 25 million bu., with all of that coming off estimated carryover. At 505 million bu., old-crop carryover is 17 million bu. below the average pre-report trade estimate. USDA now puts the national average on-farm cash bean price for 2017-18 at $9.40, up a nickel from last month.

For 2018-19 beans, smaller beginning stocks reduced total supplies by 25 million bushels. USDA also increased its new-crop crush projection by 5 million bu. to 2 billion bushels. The new-crop carryover projection is down 30 million bu. from last month and is 32 million bu. below the average pre-report trade estimate. USDA projects the national average on-farm cash bean price for 2018-19 at $8.75 to $11.25, unchanged from last month.

On old-crop wheat, USDA added 10 million bu. to estimated carryover after dropping estimated exports by that amount (to 900 million bu.). The new carryover estimate matches up with trade expectations. USDA now puts the national average on-farm cash wheat price at $4.75, up a nickel from last month.

On new-crop wheat, USDA increased total supplies by 16 million bushels (10 million bu. in bigger beginning stocks and a 6-million-bu. bump in the crop). On the demand side, USDA increased estimated 2018-19 wheat exports 25 million bu. to 950 million bushels. The end result was a 9-million-bu. cut to estimated new-crop wheat carryover. That’s also about 12 million bu. below the average pre-report trade estimate. USDA now puts the national average on-farm cash wheat price for 2018-19 at $4.60 to $5.60, up a dime on both ends of the range from last month.

For 2017-18 cotton, USDA increased estimated exports by 500,000 bales, pushing the tally to 16.0 million bales. That increase in use was taken off estimated carryover, dropping the peg to 4.2 million bales. USDA puts the national average on-farm cash cotton price at 67 cents to 69 cents, unchanged from last month.

For 2018-19 cotton, USDA moved the 500,000-bale cut to beginning stocks to the bottom line, cutting the new-crop cotton carryover projection by that amount. USDA now puts the national average on-farm cash cotton price at 60 cents to 80 cents, up a nickel on both ends of the range from last month.

 

Global carryover

Corn: 192.69 MMT for 2017-18; down from 194.85 MMT in May
— 154.69 MMT for 2018-19; down from 159.15 MMT in May
Beans: 92.49 MMT for 2017-18; up from 92.16 MMT in May
— 87.02 MMT for 2018-19; up from 86.70 MMT in May
Wheat: 272.37 MMT for 2017-18; up from 270.46 MMT in May
— 266.16 MMT for 2018-19; up from 264.33 MMT in May
Cotton: 88.21 million bales for 2017-18; unchanged from 88.21 million bales in May
— 83.02 million bales in 2018-19; down from 83.75 million bales in May

 

Global production highlights

Argentina beans: 37.0 MMT for 2017-18; compares to 39.0 MMT in May
— 56.0 MMT for 2018-19; compares to 56.0 MMT in May
Brazil beans: 119.0 MMT for 2017-18; compares to 117.0 MMT in May
— 118.0 MMT in 2018-19; compares to 117.0 MMT in May
Argentina wheat: 18.0 MMT for 2017-18; compares to 18.0 MMT in May
— 19.5 MMT in 2018-19; compares to 19.5 MMT in May
Australia wheat: 21.5 MMT for 2017-18; compares to 21.5 MMT in May
— 24.0 MMT in 2018-19; compares to 24.0 MMT in May
China wheat: 129.77 MMT for 2017-18; compares to 129.77 MMT in May
— 129.0 MMT in 2018-19; compares to 129.0 MMT in May
Canada wheat: 30.0 MMT for 2017-18; compares to 30.0 MMT in May
— 32.5 MMT in 2018-19; compares to 32.5 MMT in May
EU wheat: 151.58 MMT for 2017-18; compares to 151.58 MMT in May
— 149.40 MMT for 2018-19; compares to 150.40 MMT in May
Russia wheat: 84.99 MMT for 2017-18; compares to 84.99 MMT in May
— 68.5 MMT for 2018-19; compares to 72.0 MMT in May
Ukraine wheat: 26.98 MMT for 2017-18; compares to 26.98 MMT in May
— 26.50 MMT for 2018-19; compares to 26.50 MMT in May
China corn: 215.89 MMT for 2017-18; compares to 215.89 MMT in May
— 225.0 MMT for 2018-19; compares to 225.0 MMT in May
Argentina corn: 33.0 MMT for 2017-18; compares to 33.0 MMT in May
— 41.0 MMT for 2018-19; compares to 41.0 MMT in May
South Africa corn: 13.5 MMT for 2017-18; compares to 13.5 MMT in May
— 14.0 MMT for 2018-19; compares to 14.0 MMT in May
Brazil corn: 85.0 MMT for 2017-18; compares to 87.0 MMT in May
— 96.0 MMT for 2018-19; compares to 96.0 MMT in May
China cotton: 27.5 million bales for 2017-18; compares to 27.5 million bales in May
— 26.5 million bales for 2018-19; compares to 27.0 MMT in May

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