PF Reaction: Corn Crop, New-crop Ending Stock Bigger Than Expected

Posted on 10/10/2019 11:58 AM

Market reaction

Ahead of USDA's reports, corn futures were trading 2 to 3 cents lower, soybeans were steady to fractionally lower, winter wheat futures were steady to 2 cents lower, spring wheat futures were around a penny higher and cotton futures were steady to 15 points higher.

In reaction to the report data, corn futures have softened to trade 10 to 12 cents lower through the July contract. Soybeans have strengthened to trade 4 to 6 cents higher. Wheat futures have tumbled 7 to 10 cents, with the winter wheat markets leading to the downside. And cotton futures have reversed course to trade 7 to 37 points lower.

 

Crop production

Corn: 13.779 billion bu.; trade expected 13.684 billion bu.
— compares to 13.799 billion bu. projected in September
Beans: 3.550 billion bu.; trade expected 3.583 billion bu.
— compares to 3.633 billion bu. projected in September
Cotton: 21.705 million bales; trade expected 21.690 million bales 
— compares to 21.862 million bales projected in September

USDA’s October corn crop estimate at 13.779 billion bu. is down 20 million bu. from last month, but nearly 100 million bu. higher than the average pre-report trade estimate. USDA raised its national average yield estimate 0.2 bu. to 168.4 bu. per acre. It cut its harvested acreage estimate by 202,000 from last month to 81.815 million acres.

USDA’s objective yield data showed a slight increase in implied ear weight and a slight reduction in ear counts from last month. Given that only 29% of the corn crop was mature when USDA collected its October objective yield samples, we expect ear weights to decline and pull the national average yield down in future months.

Corn yields are estimated higher in Indiana (up 1 bu. 162 bu. per acre), Iowa (up 1 bu. to 192 bu.), Minnesota (up 2 bu. to 173 bu.), Michigan (up 7 bu. to 155 bu.), North Dakota (up 1 bu. to 146 bu.) and Ohio (up 2 bu. to 160 bu.). Yields are unchanged from last month in Kansas (136 bu. per acre), Nebraska (186 bu.) and Wisconsin (163 bu.). The yield estimate is lower in Illinois (down 1 bu. to 179 bu. per acre), Missouri (down 5 bu. to 155 bu.) and South Dakota (down 2 bu. to 154 bu.).

USDA’s soybean crop estimate of 3.550 billion bu. is down 83 million bu. from September and 33 million bu. lower than the average pre-report trade estimate. USDA lowered its national average yield estimate by 1 bu. to 46.9 bu. per acre. It cut harvested acreage by 240,000 from last month to 75.626 million acres. USDA’s objective yield data showed a slight increase in the number of pods in 18 square feet and a sharp drop in implied pod weight. Even though pod weights are down sharply from last month, they would still be record-heavy. We believe pod weights will continue to decline, possibly significantly. Pod counts are unlikely to increase given cold October weather.

Soybean yields are estimated lower than last month in Illinois (down 2 bu. to 51 bu. per acre), Indiana (down 1 bu. to 48 bu.), Iowa (down 1 bu. to 53 bu.), Kansas (down 1 bu. to 43 bu.), Minnesota (down 1 bu. to 44 bu.), Nebraska (down 2 bu. to 56 bu.), South Dakota (down 1 bu. to 43 bu.) and Wisconsin (down 1 bu. to 46 bu.). Yields are unchanged in Arkansas (50 bu. per acre), Missouri (46 bu.), North Dakota (35 bu.) and Ohio (48 bu.). The only major production state that USDA increased its yield estimate from last month is Michigan (up 2 bu. to 44 bu. per acre).

USDA’s cotton crop estimate of 12.705 million bales is down 157,000 bales from last month but 15,000 bales above the average pre-report expectations. USDA cut its national average yield by 6 lbs. to 833 lbs. per acre. It left harvested acreage at 12.509 million acres. 

Compared to last month, cotton yields are down 16 lbs. per acre in Texas and unchanged in Georgia.

 

U.S. carryover

Corn: 2.114 billion bu. for 2018-19; down from 2.445 billion bu. in September
— 1.929 billion bu. for 2019-20; down from 2.190 billion bu. in September
Beans: 913 million bu. for 2018-19; down from 1.005 billion bu. in September
— 460 million bu. for 2019-20; down from 640 million bu. in September
Wheat: 1.043 billion bu. for 2019-20; up from 1.014 billion bu. in September
Cotton: 4.85 million bales for 2018-19; unch. from 4.85 million bales in September
— 7.0 million bales for 2019-20; down from 7.2 million bales in September

Big changes on the demand side of the old-crop corn balance sheet were expected after the September 1 Grain Stocks Report. USDA started with a 3-million-bu. increase to total old-crop supplies due to an increase in imports. On the demand side, USDA now puts 2018-19 corn Feed & Residual use at 5.618 billion bu., up 343 million bu. from last month. Food, Seed & Industrial use is estimated at 6.791 billion bu., down 14 million bu. from last month (despite a 1-million-bu. increase in corn-for-ethanol consumption, which is put at 5.376 billion bushels). Total domestic use is up 329 million bu. from last month, and the 5-million-bu. increase in old-crop exports (to 2.065 billion bu.) pushes total old-crop use to 14.474 billion bu., up 334 million bu. from last month. The end result is a 331-million-bu. cut to 2018-19 corn carryover to get to the Sept. 1 corn stocks tally of 2.114 billion bushels. USDA now puts the national average on-farm cash corn price for 2018-19 at 3.61, up a penny from last month.

On new-crop corn, total supplies are down 351 million bu. from last month due to the cut to beginning stocks (last year’s carryover) and a 20-million-bu. cut to estimated 2019 corn production. On the demand side, USDA increased estimated Feed & Residual use 125 million bushels (to 5.3 billion bu.). That increase was offset by a 65-million bu. cut to Food, Seed & Industrial use (to 6.815 billion bu.; 50 million bu. of the cut is in corn-for-ethanol production, which is now put at 5.4 billion bu.), and a 150-million-bu. cut to estimated exports (to 1.9 billion bu.). That drops total estimated 2019-20 corn use 90 million bu. from last month. Ending stocks of new-crop corn are put at 1.929 billion bu., down 261 million bu. from last month. USDA now puts the national average on-farm cash corn price at $3.80, up 20 cents from last month.

Old-crop bean total supplies were down 119 million bu. from last month following the 116-million-bu. cut to the 2018 bean crop in the Quarterly Grain Stocks Report and a 3-million-bu. trimming of imports in today’s S&D update. On the demand side of the old-crop marketing year, USDA increased estimated crush 7 million bu. to 2.092 billion bu., added 3 million bu. to old-crop exports to 1.748 billion bu., and cut 36 million bu. from residual use to 39 million bushels. The end result is the 92-million-bu. cut to estimated ending stocks, which stand at 913 million bushels. USDA cut 2 cents from the national average on-farm cash bean price for 2018-19, dropping it to $8.48.

On new-crop beans, USDA’s cuts to harvested acres and yield cut the bean crop 83 million bushels. Combined with the 92-million-bu. cut to beginning stocks, total supplies are down 175 million bu. from last month. On the demand side, USDA increased estimated crush 5 million bu., to 2.120 billion bu., pushing total use up by that amount to 4.023 billion bushels. The end result is a 180-million-bu. cut to estimated 2019-20 bean ending stocks, to 460 million bushels. USDA now puts the national average on-farm cash bean price at $9.00, up 50 cents from last month.

While the 2018-19 marketing year for wheat has been over for a while, USDA did make some tweaks to the balance sheet. USDA increased total supplies by 1 million bu. and cut total use by 7 million bu. to push the 2018-19 wheat carryover up 8 million bu. to 1.080 billion bushels.

That increase in 2019-20 wheat beginning stocks partially offset an 18-million-bu. cut to the 2019 wheat crop estimate and a 15-million-bu. cut to estimated imports (which now stand at 120 million bu.). On the demand side, USDA cut estimated wheat Feed & Residual use 30 million bu. (to 140 million bu.) and cut estimated export 25 million bu. (to 950 million bu.). The 55-million-bu. cut to total 2019-20 wheat use resulted in a 29-millon-bu. increase in estimated wheat ending stocks. USDA now puts the national average on-farm cash wheat price for 2019-20 at $4.70, down a dime from last month.

On old-crop cotton, USDA made no changes to the supply- or demand-side of the balance sheet and left the national average on-farm cash cotton price unchanged from last month at 70.5 cents.

On new-crop cotton, USDA cut total supplies 160,000 metric tons thanks to the cut to the 2019 cotton crop estimate. On the demand side, USDA increased unaccounted use 40,000 bales, dropped carryover 200,000 bales from September, to 7.0 million bales. USDA now puts the national average on-farm cash cotton price at 58 cents, unchanged from last month. 

 

Global carryover (without China)

Corn: 112.19 MMT for 2018-19; down from 117.71 MMT in September
— 106.73 MMT for 2019-20; down from 110.45 MMT in September
Beans: 90.13 MMT for 2018-19; down from 92.67 MMT in September
— 76.19 MMT for 2019-20; down from 80.17 MMT in September
Wheat: 137.92 MMT for 2018-19; up from 137.47 MMT in September
— 142.14 MMT for 2019-20; up from 140.84 MMT in September
Cotton: 45.06 million bales in 2018-19; down from 45.13 million bales in September
— 50.45 million bales for 2019-20; up from 49.95 million bales in September

 

Global production highlights

Argentina beans: 55.3 MMT for 2018-19; compares to 55.3 MMT in September
— 53.0 MMT for 2019-20; compares to 53.0 MMT in September
Brazil beans: 117.0 MMT in 2018-19; compares to 117.0 MMT in September
— 123.0 MMT for 2019-20; compares to 123.0 MMT in September
Argentina wheat: 19.5 MMT in 2018-19; compares to 19.5 MMT in September
— 20.5 MMT for 2019-20; compares to 20.5 MMT in September
Australia wheat: 17.3 MMT in 2018-19; compares to 17.3 MMT in September
— 18.0 MMT for 2019-20; compares to 19.0 MMT in September
China wheat: 131.43 MMT in 2018-19; compares to 131.43 MMT in September
— 132.0 MMT for 2019-20; compares to 132.0 MMT in September
Canada wheat: 32.2 MMT in 2018-19; compares to 32.2 MMT in September
— 33.0 MMT for 2019-20; compares to 33.3 MMT in September
EU wheat: 136.86 MMT for 2018-19; compares to 136.86 MMT in September
— 152.0 MMT for 2019-20; compares to 151.0 MMT in September
Russia wheat: 71.69 MMT for 2018-19; compares to 71.69 MMT in September
— 72.5 MMT for 2019-20; compares to 72.5 MMT in September
Ukraine wheat: 25.06 MMT for 2018-19; compares to 25.06 MMT in September
— 28.7 MMT for 2019-20; compares to 28.7 MMT in September
China corn: 257.33 MMT for 2018-19; compares to 257.33 MMT in September
— 254.0 MMT for 2019-20; compares to 254.0 MMT in September
Argentina corn: 51.0 MMT for 2018-19; compares to 51.0 MMT in September
— 50.0 MMT for 2019-20; compares to 50.0 MMT in September
Brazil corn: 101.0 MMT for 2018-19; compares to 101.0 MMT in September
— 101.0 MMT for 2019-20; compares to 101.0 MMT in September
Ukraine corn: 35.81 MMT for 2018-19; compares to 35.81 MMT in September
— 36.0 MMT for 2018-19; compares to 36.0 MMT in September
South Africa corn: 11.5 MMT for 2018-19; compares to 11.5 MMT in September
— 14.0 MMT in 2019-20; compares to 14.0 MMT in September
China cotton: 27.75 million bales for 2018-19; compares to 27.75 million bales in September
— 27.75 million bales for 2019-20; compares to 27.75 million bales in September

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