** USDA July WASDE Report Analysis: The July WASDE report was expectedly bearish on the grains and supportive to soybeans. Soybeans should gain on the grains on the weeks ahead as the market adds additional weather premium into soy complex prices as end stock forecasts decline. And US spring wheat production will continue to decline with abandonment rates to soar by the August and final Sept report. Today’s US HRS and durum crop estimates are only the starting point of the production decline process. ARC research forecasts another 65-85 Mil Bu drop in US spring wheat production by the final count.
The July Crop report data has already been digested. The focus of the market going forward will shift back to Central US weather with the next 3 weeks key to US corn/soybean yield. A dynamic market will persist with volatility noted around each weather forecast released.
** NASS estimated 2017 US wheat production at 1,760 Mil Bu (down 64 Mil Bu or 3.5% from the June forecast) based on a dramatic cut in US spring wheat production. NASS estimated US HRS wheat production at 385 Mil Bu.
** US HRS wheat end stocks were forecast at just 122 Mil Bu, down 113 Mil Bu or 48% from last year. US HRW wheat end stocks fell 145 Mil Bu to 448 Mil Bu while US SRW wheat end stocks rose to 236 Mil Bu from this year’s 215 Mil Bu.
WASDE cut 2017/18 US wheat exports by 25 Mil Bu to 975 Mil Bu and also cut feed/residual use by 20 Mil Bu to 150 Mil Bu. The cuts in export/feed use of 45 Mil Bu helped balance the decline in new crop supply of 64 Mil Bu. When the additional old crop carryover of 23 Mil Bu is included, its raised 2017/18 US wheat end stocks to 938 Mil Bu – which makes it difficult to sustain a rally much above $5.70-5.90 basis September Chi wheat. The wheat data was bearish.
** ARC notes that 2017/18 world wheat end stocks grew to a record large 261.2 MMTs, up slightly from June. Russian ’17 wheat production was raised to a near record 72 MMTs, while Australian production was trimmed by 1.5 MMTs to 23.5 MMTs. The EU wheat crop was only moderately cut by 750,000 MTs to 150.0 MMTs. The world still has plenty of wheat, but world major exporter supplies are in decline with a reduction expected in Canada in the August WASDE report.
** US 2017/18 US corn end stocks rose to 2,325 Mil Bu, up 215 Mil Bu from the June forecast. The increase is based on the enlarged old crop supplies and the larger new crop seeding that was indicated in the June NASS 30th report. WASDE used a trend corn yield of 170.7 BPA. If the yield was cut 5 BPA, it would leave US 2017/18 corn end stocks of 1,900 Mil Bu! Such stocks are adequate and it would take a yield of less than 160 BPA to become bullish of corn. ARC still sees 2017/18 of US corn exports being 150 Mil Bu lower at 1,725 Mil Bu.
** US 2017/18 world corn stocks rose to 200.81 MMTs, up 6.5 MMTs from June, but still down 27 MMTs from the current crop year. The 2017 Ukraine corn crop was left alone at 28.5 MMTs, which many see as 3-4 MMTs as too large.
** US 2016/17 soybean end stocks were lowered by 40 Mil Bu based on a 50 Mil Bu increase in exports (record large 2,100 Mil Bu), and a 10 Mil Bu reduction in the residual to 14 Mil Bu. The smaller old crop stocks reduced 2017/18 US soybean end stocks to 460 Mil Bu. ARC would note that WASDE raised China’s 16/17 US soybean imports to 91 MMTs and raised 2017/18 to 94 MMTs. The rise in Chinese imports was long overdue. The average new crop US soybean price was raised to $9.40. The soy data was considered supportive and a 2 BPA decline in new crop yield dropping 17/18 US soy end stocks below 300 Mil Bu with a 3 BPA decline opening the market up to $11-12.00.
** Midday GFS Weather Model Update: The forecast is as hot/dry as the overnight run. The GFS at 12z is very similar to the 0z EU model which raises our forecast confidence. An amplified high pressure Ridge in the Intermoutain West will slowly progress east to a position over the Plains/Midwest next week. The mean position of the Ridge holds across the Midwest into July 27th which will promote additional hot/dry weather!
** Midday GFS 12z Rainfall forecast into July 22nd:
