PF Reaction: Dramatic Change to New-crop Corn Ending Stocks

Posted on 06/11/2019 12:00 PM

Market reaction

Ahead of USDA's report, corn and soybean futures were trading around a nickel lower, wheat futures were 2 to 8 cents lower and cotton futures were 60 to 90 points lower.

In reaction to the reports, corn futures are 10 to 13 cents higher, soybeans are 1 to 2 cents higher, SRW wheat futures are up 5 to 10 cents, HRW is 2 to 5 cents higher and spring wheat futures are steady to 7 cents lower. Cotton futures are down 40 to 85 points.

 

Winter wheat production

All wheat: 1.903 billion bu.; trade expected 1.883 billion bu. 
— compares to 1.897 billion bu. in May
All winter wheat: 1.274 billion bu.; trade expected 1.251 billion bu. 
— compares to 1.268 billion bu. in May
HRW: 794 million bu.; trade expected 765 million bu. 
— compares to 780 million bu. in May
SRW: 258 million bu.; trade expected 261 million bu. 
— compares to 265 million bu. in May
White winter: 222 million bu.; trade expected 224 million bu. 
— compares to 224 million bu. in May

USDA’s all-wheat production estimate is up 6 million bu. from last month and 20 million bu. above the average pre-report trade guess. Its national average all wheat yield is 48.7 bu. per acre, up 0.1 bu. from last month.

The bigger-than-expected winter wheat crop estimate is driven by the hard red winter wheat crop estimate that came in 29 million bu. above the average pre-report trade estimate. That’s also up 14 million bu. from last month.

The SRW wheat crop peg is about 3 million bu. below the average pre-report trade estimate and down about 7 million bu. from last month. The white winter wheat crop estimate is down about 2 million bu. from last month and pre-report trade expectations.

USDA’s national average winter wheat yield estimate is 50.5 bu. per acre, up 0.2 bu. from last month. Harvested winter wheat acres are estimated at 25.214 million, unchanged from last month.

Looking at the state-by-state yield changes, USDA puts the South Dakota HRW yield at 52 bu. per acre, down 2 bu. from last month. North Dakota is expected to yield 50 bu. per acre (up 4 bu. from May), Kansas is estimated at 50 bu. (up 1 bu.) and Oklahoma HRW yields are expected at 37 bu. per acre (up 2 bu. from last month). Yields were unchanged from last month for Nebraska (50 bu.), Colorado (41 bu.) and Texas (33 bu. per acre).

In soft red winter wheat country, yields were generally pointed down from last month. Wisconsin yields are down 6 bu. from May (to 65 bu. per acre), Illinois down 2 bu. (to 65 bu.), Missouri down 5 bu. (to 56 bu.), Arkansas down 1 bu. (to 60 bu.) Mississippi down 3 bu. (to 52 bu.), Indiana down 4 bu. (to 69 bu.), Ohio down 6 bu. (to 63 bu.) and Michigan is down 2 bu. from last month (to 74 bu. per acre). SRW yields were up from last month in Kentucky (up 2 bu. to 77 bu.), Tennessee (up 2 bu. to 67 bu.), Virginia (up 5 bu. to 67 bu.) and North Carolina (up 2 bu. from last month to 56 bu. per acre).

 

U.S. carryover

Corn: 2.195 billion bu. for 2018-19; up from 2.095 billion bu. in May
— 1.675 billion bu. for 2019-20; down sharply from 2.485 billion bu. in May
Beans: 1.070 billion bu. for 2018-19; up from 995 million bu. in May
— 1.045 billion bu. for 2019-20; up from 970 million bu. in May
Wheat: 1.102 billion bu. for 2018-19; down from 1.127 billion bu. in May
— 1.072 billion bu. for 2019-20; down from 1.141 billion bu. in May
Cotton: 4.65 million bales for 2018-19; unchanged from 4.65 million bales in May
— 6.4 million bales for 2019-20; unchanged from 6.4 million bales in May

USDA made no changes to estimated old-crop corn supplies. On the demand side of the balance sheet, USDA cut estimated exports by 100 million bushels (to 2.2 billion bu.). USDA increased its on-farm old-crop cash corn price by a dime from last month to $3.60.

On the new-crop balance sheet, USDA slashed total supplies by 1.235 billion bu. to 15.925 billion bushels. That was the result of a 3-million-acre cut to planted acres and a 10-bu.-per-acre cut to projected yield. USDA noted: “The yield projection is based on a weather-adjusted trend assuming normal mid-May planting progress and summer growing season weather with a stochastic adjustment to account for the asymmetric response of yield to July precipitation. For June, corn area and yield are both lowered reflecting delayed planting progress observed during the month of May and into early June.”

On the demand side of new-crop corn balance sheet, USDA cut total use by 425 million bu. from last month. USDA cut feed and residual use by 300 million bu. (to 5.15 billion bu.) and exports by 125 million bushels (to 2.150 billion bu.). Those adjustments to supply and demand resulted in projected new-crop ending stocks being cut by 810 million bu. from last month. Corn carryover is now expected to decline 520 million bu. year-over-year. USDA now forecasts the new-crop on-farm cash corn price at $3.80, up 50 cents form last month.

USDA made no changes to estimated old-crop soybean supplies. On the demand side of the old-crop balance sheet, USDA cut estimated exports by 75 million bushels (to 1.7 billion bu.). Old-crop ending stocks were raised by that amount. USDA lowered its old-crop on-farm cash soybean price by a nickel from last month to $8.50.

On the new-crop balance sheet, USDA made no changes to soybean planted acres or yield. It increased its total supply projection 75 million bu. from last month due to bigger beginning stocks. USDA made no changes to the demand side of the new-crop soybean balance sheet. The increase to total supplies and no change to use raised its new-crop ending stocks projection by 75 million bu. from last month. USDA now estimates the new-crop on-farm cash soybean price at $8.25, up 15 cents from May.

The only change to USDA’s old-crop balance sheet for wheat was a 25-million-bu. increase to estimated exports, which it now puts 950 million bushels. That reduced old-crop ending stocks by a like amount from last month. USDA kept its average on-farm old-crop wheat price forecast at $5.20.

For the 2019-20 marketing year, USDA’s smaller ending stocks forecast for wheat more than offset a 6-million-bu. increase to the estimated crop size. That resulted in total supplies being cut 19 million bu. from last month. On the demand side of the balance sheet, USDA increased feed and residual use by 50 million bushels (to 140 million bu.). Smaller supplies and more use cut projected ending stocks 69 million bu. from last month. USDA raised its national average new-crop on-farm cash price projection by 40 cents from last month to $5.10.

USDA made no changes to the supply or demand estimates in its old-crop cotton balance sheet. The department kept its average on-farm old-crop cotton price at 70 cents per pound.

USDA also made no changes to the supply or demand projections in its 2019-20 cotton balance sheet this month. USDA now projects the average on-farm new-crop cotton price at 64 cents per lb., down a penny from last month.

 

Global carryover (without China)

Corn: 115.54 MMT for 2018-19; down from 116.11 MMT in May
— 98.71 MMT for 2019-20; down sharply from 122.90 MMT in May
Beans: 91.6 MMT for 2018-19; up from 90.99 MMT in May
— 91.28 MMT for 2019-20; up from 90.72 MMT in May
Wheat: 136.58 MMT for 2018-19; up from 134.99 MMT in May
— 148.15 MMT for 2019-20; up from 146.82 MMT in May
Cotton: 43.16 million bales in 2018-19; up from 42.85 million bales in May
— 45.76 million bales for 2019-20; up from 44.94 million bales in May

 

Global production highlights

Argentina beans: 56.0 MMT for 2018-19; compares to 56.0 MMT in May
— 53.0 MMT for 2019-20; compares to 53.0 MMT in May
Brazil beans: 117.0 MMT in 2018-19; compares to 117.0 MMT in May
— 123.0 MMT for 2019-20; compares to 123.0 MMT in May
Argentina wheat: 19.5 MMT in 2018-19; compares to 19.5 MMT in May
— 20.0 MMT for 2019-20; compares to 20.0 MMT in May
Australia wheat: 17.3 MMT in 2018-19; compares to 17.3 MMT in May
— 22.5 MMT for 2019-20; compares to 22.5 MMT in May
China wheat: 131.43 MMT in 2018-19; compares to 131.43 MMT in May
— 132.0 MMT for 2019-20; compares to 132.0 MMT in May
Canada wheat: 31.8 MMT in 2018-19; compares to 31.8 MMT in May
— 34.5 MMT for 2019-20; compares to 34.5 MMT in May
EU wheat: 137.22 MMT for 2018-19; compares to 137.22 MMT in May
— 153.8 MMT for 2019-20; compares to 153.8 MMT in May
Russia wheat: 71.69 MMT for 2018-19; compares to 71.69 MMT in May
— 78.0 MMT for 2019-20; compares to 77.0 MMT in May
Ukraine wheat: 25.06 MMT for 2018-19; compares to 25.06 MMT in May
— 30.0 MMT for 2019-20; compares to 29.0 MMT in May
China corn: 257.33 MMT for 2018-19; compares to 257.33 MMT in May
— 254.0 MMT for 2019-20; compares to 254.0 MMT in May
Argentina corn: 49.0 MMT for 2018-19; compares to 49.00 MMT in May
— 50.0 MMT for 2019-20; compares to 49.0 MMT in May
South Africa corn: 11.5 MMT for 2018-19; compares to 11.00 MMT in May
— 14.0 MMT in 2019-20; compares to 14.0 MMT in May
Brazil corn: 101.0 MMT for 2018-19; compares to 100.00 MMT in May
— 101.0 MMT for 2019-20; compares to 101.0 MMT in May
China cotton: 27.75 million bales for 2018-19; compares to 27.75 million bales in May
— 27.75 million bales for 2019-20; compares to 27.75 million bales in May

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