PF Special Reaction: Bigger-than-expected Cuts to Corn & Soybean Carryover

Posted on 03/09/2017 10:22 AM

Market reaction

Ahead of USDA's reports, corn futures were trading steady to 1 cent higher, beans were 11 to 14 cents higher, wheat was 3 to 7 cents lower and cotton was steady to 50 points higher.

After the report, and despite the deeper-than-expected cuts to old- and new-crop corn carryover, futures are now 4 to 6 cents lower. Soybeans are mixed, with traders focused on unwinding bull spreads. Wheat is the only major market responding as one would expect to the updated estimates and is trading 7 to 13 cents lower. Cotton is trading mostly 15 to 25 points lower.

Pro Farmer Editor Brian Grete reacts to USDA's reports:

Winter wheat production

All wheat: 2.077 billion bu.; trade expected 2.014 billion bu.
-- compares to 1.998 billion bu. in May; 2.052 billion bu. in 2015
All winter wheat: 1.507 billion bu.; trade expected 1.451 billion bu.
-- compares to 1.427 billion bu. in May; 1.370 billion bu. in 2015
HRW: 937.7 million bu.; trade expected 883 million bu.
-- compares to 862.5 million bu. in May; 827 million bu. in 2015
SRW: 354.6 million bu.; trade expected 355 million bu.
-- compares to 356.6 million bu. in May; 359 million bu. in 2015
White winter: 214.4 million bu.; trade expected 211 million bu.
-- compares to 208 million bu. in May; 184 million bu. in 2015

All wheat production is now estimated 79 million bu. above the May estimate on a national average all-wheat yield of 48.6 bu. per acre, up 1.9 bu. per acre from last month. USDA increased its winter wheat production estimate by 80 million bu. from last month, with 75.2 million bu. of the increase coming from the hard red winter wheat crop estimate. USDA sees a national average winter wheat crop yield of a record 50.5 bu. per acre, up 2.7 bu. per acre from last month and 8 bu. above last year.

 

2015-16 U.S. carryover

Corn: 1.708 billion bu.; down from May est. of 1.803 billion bu.
-- 2.008 billion bu. for 2016-17; compares to 2.153 billion bu. in May
Beans: 370 million bu.; down from May est. of 400 million bu.
-- 260 million bu. for 2016-17; compares to 305 million bu. in May
Wheat: 980 million bu.; up from May est. of 978 million bu.
--
1.050 billion bu. for 2016-17; compares to 1.029 billion bu. in May
Cotton: 4.1 million bales; up from May est. of 4.0 million bales
-- 4.8 million bales for 2016-17; compares to 4.7 million bales in May

USDA cut estimated old-crop corn carryover by 95 million bu. from last month, and the estimate is 64 million bu. below the average pre-report trade guess. USDA increased estimated old-crop supplies by 5 million bushels (by way of a 5-million-bu. increase in estimated imports). On the demand side, USDA increased estimated exports 100 million bu., pushing the expected tally to 1.825 billion bushels. There were no other changes on the old-crop balance sheet, drawing carryover down 95 million bu. from last month. USDA now sees a national average on-farm old-crop cash corn price of $3.60 to $3.80, up a dime on both ends of the range from last month.

For new-crop corn, USDA cut total supplies by 95 million bu. (lower beginning stocks), and increased its export projection by 50 million bushels (to 1.95 billion bu.). That dropped 2016-17 corn carryover by 145 million bu. from last month. That is also 117 million bu. below the average pre-report trade guess. USDA now sees a national average on-farm new-crop cash corn price of $3.20 to $3.80, up 15 cents on both ends of the range from last month.

Old-crop soybean carryover was cut 30 million bu. from last month and is 15 million bu. below the average pre-report trade estimate. USDA made no change on the supply-side of the old-crop balance sheet. On the demand side, USDA increased estimated crush by 10 million bu. (to 1.89 billion bu.) and exports by 20 million bu. (to 1.76 billion bu.), resulting in the 30-million-bu. drop in estimated carryover. USDA now puts the national average on-farm old-crop cash bean price at $9.05, up 20 cents from last month.

New-crop bean carryover was cut 45 million bu. from last month and is 29 million bu. below the average pre-report trade estimate. USDA lowered beginning stocks by 30 million bushels. On the demand side, projected exports were increased 15 million bu. (to 1.9 billion bu.), resulting in the 45-million-bu. drop in projected carryover. USDA puts the national average on-farm new-crop cash bean price at $8.75 to $10.25, up 40 cents on both ends of the range from last month.

Old-crop wheat carryover was increased 2 million bu. from last month and is 1 million bu. below the average pre-report trade estimate. USDA cut estimated 2015-16 wheat imports by 3 million bu. and cut 5 million bu. from estimated exports to result in the carryover increase. USDA now puts the national average on-farm old-crop cash wheat price at $4.90, unchanged from May.

On new-crop wheat, carryover was increased 21 million bu. from last month and is 5 million bu. above the average pre-report trade estimate. Total 2016-17 wheat supplies were increased 76 million bu. from last month, a combination of the slightly bigger beginning stocks, the bigger crop estimate and a 5-million-bu. cut to estimated imports. On the demand side, USDA increased estimated feed & residual use by 30 million bu. (to 200 million bu.) and raised estimated exports by 25 million bushels (to 900 million bu.). USDA now puts the national average on-farm new-crop cash wheat price at $3.60 to $4.40, down a dime on both ends of the range from last month.

Old-crop cotton carryover is up 100,000 bales from last month. USDA made no change to the supply side of the cotton balance sheet and cut domestic use by 50,000 bales and unaccounted use by 50,000 bales. USDA puts the national average on-farm old-crop cash cotton price at 58 cents, unchanged from last month.

On new-crop cotton, carryover is up 100,000 bales from last month. The only change from last month is the 100,000-bale increase in beginning stocks. USDA puts the national average on-farm new-crop cash cotton price at 47 cents to 67 cents, unchanged from May.

 

2015-16 global carryover

Corn: 206.45 MMT; down from May est. of 207.87 MMT
-- 205.12 for 2016-17; compares to 207.04 MMT in May
Beans: 72.29 MMT; down from May est. of 74.25 MMT
-- 66.31 MMT for 2016-17; compares to 68.21 MMT in May
Wheat: 243.01 MMT; up from May est. of 242.91 MMT
-- 257.84 MMT for 2016-17; compares to 257.34 MMT in May
Cotton: 102.08 mil. bales; down from May est. of 102.84 mil. bales
-- 94.73 million bales for 2016-17; compares to 96.48 million bales in May

 

2015-16 global production highlights

Argentina beans: 56.5 MMT; compares to 56.5 MMT in May
-- 57.0 MMT for 2016-17; compares to 57.0 MMT in May
Brazil beans: 97.0 MMT; compares to 99.0 MMT in May
-- 103.0 MMT for 2016-17; compares to 103.0 MMT in May
Argentina wheat: 11.3 MMT; compares to 11.3 MMT in May
-- 14.5 MMT for 2016-17; compares to 14.5 MMT in May
Australia wheat: 24.5 MMT; compares to 24.5 MMT in May
-- 25.0 MMT for 2016-17; compares to 25.0 MMT in May
China wheat: 130.19 MMT; compares to 130.19 MMT in May
-- 130.0 MMT for 2016-17; compares to 130.0 MMT in May
Canada wheat: 27.6 MMT; compares to 27.6 MMT in May
-- 28.5 MMT for 2016-17; compares to 28.5 MMT in May
EU wheat: 160.01 MMT; compares to 160.01 MMT in May
-- 157.5 MMT for 2016-17; compares to 156.5 MMT in May
Russia wheat: 61.04 MMT; compares to 61.04 MMT in May
-- 64.0 MMT for 2016-17; compares to 63.0 MMT in May
FSU-12 wheat: 117.60 MMT; compares to 117.60 MMT in May
-- 116.83 MMT for 2016-17; compares to 115.83 MMT in May
China corn: 224.58 MMT; compares to 224.58 MMT in May
-- 218.0 MMT for 2016-17; compares to 218.0 MMT in May
Argentina corn: 27.0 MMT; compares to 27.0 MMT in May
-- 34.0 MMT for 2016-17; compares to 34.0 MMT in May
South Africa corn: 6.5 MMT; compares to 6.5 MMT in May
-- 13.0 MMT for 2016-17; compares to 13.0 MMT in May

Brazil corn: 77.5 MMT; compares to 81.0 MMT in May
-- 82.0 MMT for 2016-17; compares to 82.0 MMT in May
China cotton: 22.5 mil. bales; compares to 23.8 mil. bales in May
-- 21.5 million bales for 2016-17; compares to 22.5 million bales in May

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