Report Reaction: Big Ending Stocks and Lower Prices Projected for 2019-20

Posted on 05/10/2019 12:20 PM

Market reaction

Ahead of USDA's report, corn futures were trading narrowly mixed, soybeans were 2 to 3 cents lower, wheat futures were fractionally to 2 cents higher and cotton futures were around 30 points lower.

 

In reaction to the reports, corn futures are trading 3 to 6 cents lower, soybeans are narrowly mixed, wheat futures are 1 to 7 cents lower and cotton futures are down 50 to 100 points in most contracts.

 

 

Winter wheat production

 

All wheat: 1.897 billion bu.; trade expected 1.909 billion bu.
— compares to 1.884 billion bu. in 2018
All winter wheat: 1.268 billion bu.; trade expected 1.277 billion bu.
— compares to 1.184 billion bu. in 2018
HRW: 780 million bu.; trade expected 767 million bu.
— compares to 662 million bu. in 2018
SRW: 265 million bu.; trade expected 277 million bu.
— compares to 286 million bu. in 2018
White winter: 224 million bu.; trade expected 232 million bu.
— compares to 236 million bu. in 2018

 

Winter wheat production is estimated up 84 million bu. from year-ago, but USDA’s first survey-based crop estimate is 9 million bu. below the average pre-report trade estimate. The national average winter wheat yield is estimated at 50.3 bu. per acre, up 2.4 bu. from 2018. Harvested winter wheat acres are estimated at 25.214 million, up 472,000 acres from year-ago.

 

Looking at production tallies for some of the major hard red winter wheat states, Colorado is expected to average 41 bu. per acre (36 bu. year-ago), Kansas is estimated at 49 bu. per acre (38 bu. last year), North Dakota at 46 bu. (43 bu. last year), South Dakota at 54 bu. (48 bu. last year), Nebraska at 50 bu. (49 bu. last year), Oklahoma at 35 bu. (28 bu. last year) and Texas is estimated at 33 bu. per acre (compared to 32 bu. last year). The HRW wheat crop estimate is up 118 million bu. from year-ago and is about 13 million bu. above the average pre-report trade estimate.

 

In soft red winter wheat areas, Missouri is estimated at 61 bu. per acre (up 2 bu. from year-ago), Arkansas is estimated at 61 bu. (up 6 bu. from last year), Illinois 67 bu. (up 1 bu.), Indiana 73 bu. (up 2 bu.) and Mississippi 55 bu. (up 6 bu. per acre from year-ago). Ohio is expected to see a SRW wheat yield of 69 bu., down 6 bu. from year-ago. The SRW crop estimate is down about 21 million bu. from year-ago and about 12 million bu. below the average pre-report trade estimate.

 

In white wheat areas, Washington is expected to yield 68 bu. per acre (down 8 bu. from year-ago), Oregon 58 bu. (down 9 bu.), Idaho 87 bu. (down 3 bu.) and Montana is estimated at 43 bu. per acre, (down 7 bu. from year-ago).  The white winter wheat crop is down about 12 million bu. from year-ago and 8 million bu. below the average pre-report trade estimate.

 

The report assumes a combined spring wheat and durum crop of 629 million bushels. All wheat production is estimated up 13 million bu. from year-ago, but is 12 million bu. below the average pre-report trade estimate.

 

 

U.S. carryover

 

Corn: 2.095 billion bu. for 2018-19; up from 2.035 billion bu. in April
— projection of 2.485 billion bu. for 2019-20
Beans: 995 million bu. for 2018-19; up from 895 million bu. in April
— projection of 970 million bu. for 2019-20
Wheat: 1.127 billion bu. for 2018-19; up from 1.087 billion bu. in April
— projection of 1.141 billion bu. for 2019-20
Cotton: 4.65 million bales for 2018-19; up from 4.40 million bales in April
— projection of 6.40 million bales for 2019-20

 

USDA’s old-crop corn ending stocks estimate at 2.095 billion bu. came in 60 million bu. higher than last month and 40 million bu. higher than the average pre-report estimate. On the supply side of the balance sheet, USDA trimmed estimated imports by 5 million bushels (to 35 million bu.). USDA reduced estimated food, seed and residual use by 65 million bu. (to 6.9 billion bu.), including a 50-million-bu. cut to corn-for-ethanol use (to 5.45 billion bu.). Estimated old-crop exports were kept at 2.3 billion bushels. USDA now estimates the old-crop on-farm cash corn price at $3.50, down a nickel from the midpoint of last month’s price range.

 

USDA’s new-crop corn ending stocks projection at 2.485 billion bu. would be up 390 million bu. from this year and 354 million bu. higher than the average pre-report estimate. Total supplies are forecast to rise 565 million bu. to 17.160 billion bushels. USDA expects total use to rise 175 million bu. to 14.675 billion bushels. Year-over-year increases are expected for feed and residual use (up 150 million bu. to 5.45 billion bu.) and food, seed and industrial use (up 50 million bu. to 6.95 billion bu.), including a 50-million-bu. increase to corn-for-ethanol use (to 5.5 billion bu.). Exports are projected to decline 50 million bushels (to 2.275 billion bu.). USDA projects the 2019-20 on-farm cash corn price to decline 20 cents from this year to $3.30.

 

USDA’s old-crop soybean carryover estimate at 995 million bu. was increased 100 million bu. from last month and came in 75 million bu. higher than the trade anticipated. USDA made no changes on the supply side of the old-crop balance sheet. USDA cut estimated exports by 100 million bushels (to 1.775 billion bu.). The crush estimate was unchanged at 2.1 billion bushels. USDA now estimates the old-crop on-farm cash soybean price at $8.55, down a nickel from the midpoint last month.

 

USDA’s new-crop ending stocks projection at 970 million bu. was 60 million bu. more than anticipated and would be down a modest 25 million bu. from the current marketing year. USDA forecasts total supplies to rise 166 million bu. to a record 5.165 billion bushels. USDA forecasts total use to increase 191 million bu. to 4.195 billion bushels. Year-over-year increases in use are projected for crush (up 15 million bu. to 2.115 billion bu.) and exports up 175 million bushels (to 1.950 billion bu.). USDA projects the average on-farm cash soybean price for 2019-20 at $8.10, which would be down 45 cents from the current marketing year.

 

USDA’s old-crop wheat ending stocks estimate at 1.127 billion bu. was up 40 million bu. from April and is 32 million bu. higher than the average pre-report estimate. USDA cut its wheat import forecast by 5 million bushels (to 140 million bu.). On the demand side of the balance sheet, USDA cut food use by 5

million bu. (to 960 million bu.), feed and residual use by 20 million bu. (to 50 million bu.) and trimmed exports by 20 million bushels (to 925 million bu.). USDA now estimates the old-crop on-farm cash wheat price at $5.20, unchanged from last month.

 

USDA’s new-crop wheat carryover projection at 1.141 billion bu. was 81 million bu. higher than traders anticipated and would be up 14 million bu. from the 2018-19 marketing year. Total supplies are forecast to rise 41 million bu. to 3.164 billion bushels. Total use is projected to rise 26 million bu. to 2.023 billion bushels. Year-over-year increases in use are forecast for feed and residual (up 40 million bu. to 90 million bu.) and food use (up 5 million bu. to 965 million bu.). New-crop exports are projected to decline 25 million bu. to 900 million bushels. USDA forecasts the average on-farm cash wheat price at $4.70 for 2019-20, down 50 cents from the current marketing year.

 

USDA’s old-crop cotton carryover estimate at 4.65 million bales was up 250,000 bales from last month. USDA made just a modest increase to old-crop production of 20,000 bales. On the demand side of the balance sheet, USDA cut estimated exports by 250,000 bales (to 14.75 million bales). USDA now estimates the old-crop cash on-farm cotton price at 70 cents, down a penny from last month.

 

USDA’s new-crop cotton ending stocks projection at 6.4 million bales was 70,000 bales higher than traders expected and would be up 1.75 million bales from the current marketing year. Total supplies are expected to rise 3.99 million bales to 26.66 million bales. Total use is projected to rise 2.25 million bales to 20.10 million bales. A year-over-year increase is projected for exports of 2.25 million bales to 17.00 million bales. USDA projects the 2019-20 average on-farm cash cotton price at 65 cents, down a nickel from the current marketing year.

 

 

Global carryover (without China)

 

Corn: 116.11 MMT for 2018-19; up from 109.21 MMT in April
— projection of 122.90 MMT for 2019-20
Beans: 90.99 MMT for 2018-19; up from 85.16 MMT in April
— projection of 90.72 MMT for 2019-20
Wheat: 134.99 MMT for 2018-19; down from 135.61 MMT in April
— projection of 146.82 MMT for 2019-20
Cotton: 42.85 million bales in 2018-19; down from 43.33 million bales in April
— projection of 44.94 million bales for 2019-20

 

 

Global production highlights

 

Argentina beans: 56.0 MMT for 2018-19; compares to 55.0 MMT in April
— projection of 53.0 MMT for 2019-20
Brazil beans: 117.0 MMT in 2018-19; compares to 117.0 MMT in April
— projection of 123.0 MMT for 2019-20
Argentina wheat: 19.5 MMT in 2018-19; compares to 19.5 MMT in April
— projection of 20.0 MMT for 2019-20
Australia wheat: 17.3 MMT in 2018-19; compares to 17.3 MMT in April
— projection of 22.5 MMT for 2019-20
China wheat: 131.43 MMT in 2018-19; compares to 131.43 MMT in April
— projection of 132.0 MMT for 2019-20
Canada wheat: 31.8 MMT in 2018-19; compares to 31.8 MMT in April
— projection of 34.5 MMT for 2019-20
EU wheat: 137.22 MMT for 2018-19; compares to 137.60 MMT in April
— projection of 153.8 MMT for 2019-20
Russia wheat: 71.69 MMT for 2018-19; compares to 71.69 MMT in April
— projection of 77.0 MMT for 2019-20
Ukraine wheat: 25.06 MMT for 2018-19; compares to 25.06 MMT in April
— projection of 29.0 MMT for 2019-20
China corn: 257.33 MMT for 2018-19; compares to 257.33 MMT in April
— projection of 254.0 MMT for 2019-20
Argentina corn: 49.00 MMT for 2018-19; compares to 47.00 MMT in April
— projection of 49.0 MMT for 2019-20
South Africa corn: 11.00 MMT for 2018-19; compares to 11.00 MMT in April
— projection of 14.0 MMT for 2019-20
Brazil corn: 100.00 MMT for 2018-19; compares to 96.00 MMT in April
— projection of 101.0 MMT for 2019-20
China cotton: 27.75 million bales for 2018-19; compares to 27.75 million bales in April
— projection of 27.75 million bales for 2019-20

 

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