USDA Report Surprisingly Bearish! Limited Yield Loss due to Adverse Summer Weather?

Aug 10, 12:13 pm | Mid-day Commentary | Share this:

** The August USDA Crop report was bearish with US corn/soybean yields well above the average trade estimates. NASS estimated the 2017 US corn yield at 169.5 BPA with the soybean yield at 49.4 BPA. Such yields were well above the top end of analyst forecasts with the additional supply flowing through to 2017/18 end stocks. The USDA report data has many questioning the ear weight that NASS is using on corn (3rd best on record)? We all needs to remember that this is a starting point in the actual measurement of US summer row crops. And based on recent year’s yield, NASS appears to be starting out strong. ARC suspects that using such a high US corn ear weight is incorrect, but it will take September/October NASS estimates to confirm. For now, the tone of the market will be bearish and seasonal lows should follow a pattern similar to last year in being formed in August or early September. The report offered limited bullish fodder into harvest.

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  The USDA estimated the 2017 US corn crop at 14,153 Mil Bu with a yield of 169.5 BPA on harvested acres of 83.5 Mil. The crop is down 995 Mil Bu from last year and down 102 Mil Bu from their forecast in July.

  WASDE lowered their 2017/18 US corn end stock estimate by 52 Mil Bu to 2,273 Mil Bu. Such stocks are down 97 Mil Bu from the current year. ARC notes that WASDE cut 2017/18 US corn exports by 25 Mil Bu to 1,850 Mil Bu while feed use was also reduced 25 Mil Bu to 5,450 Mil Bu.

  World 2017/18 world corn end stocks held steady at 200.9 MMTs, down 28 MMTs from last year. The Brazilian 2017 corn harvest was 98.5 MMTs with Argentina at 41 MMTs. Surprisingly, WASDE left the Ukraine corn crop at 28.5 MMTs following weeks of acute heat/dryness.

  US and world corn end stocks would argue for a drop in spot CBOT corn futures to $3.50 with upside price potential during the winter to 3.90. With September corn futures at $3.60, this is no place to make new sales.

  US all wheat production fell to 1,739 Mil Bu or down 21 Mil Bu from the July estimate. The decline was in spring wheat an additional downside adjustments are expected based on an increase in abandonment. WASDE also raised imports by 10 Mil Bu to 150 Mil Bu due to the shortage of spring wheat.

  US 2017/18 US wheat end stocks were lowered to 933 Mil Bu, down 5 Mil Bu with exports left unchanged at 975 Mil Bu.

  World wheat end stocks were record large at 264.7 MMTs, up 4 MMTs from July with the Russian wheat crop raised to a record large 77.5 MMTs  Ukraine wheat harvest was also hiked by 1.5 MMTs to 26.5 MMTs. The EU wheat harvest was lowered 500,000 MTs with Canadian crop off 1.8 MMTs.

  The big surprise of the report was the 2017 US soybean yield at 49.7 BPA, a record for the August report being nearly .9 BPA above last year. NASS gauged the IL soy yield at 58 BPA – down only 1 BPA from last year?  WI was down 7 BPA at 48 BPA and the IA soybean yield was off 4.5 BPA at 56 BPA with ND/SD down 8.5 BPA (each) at 33.0/41.0 BPA (compared to last year). The IL soybean yield seems to be way too high relative to nearby states!

  ARC would note that the August report offers no pod numbers/weights to use and that we see the August yield as being the high for the year.

  2017/18 US soybean end stocks were forecast at 475 Mil Bu, up 15 Mil Bu from the July forecast. WASDE raised old crop soybean exports by 50 Mil Bu and cut crush by 10 Mil Bu as expected. This dropped 2016/17 US soybean end stocks to 360 Mil Bu. WASDE raised 2017/18 US soybean exports to a record large 2,225 Mil Bu with total use pegged above 4,300 Mil Bu for the 1st time on record!

** AgResource Market Comment: Its hard to make any sense of the August USDA report! But, we have learned over the years not to argue. We would remind clients that the August report is the 1st measuring point and yield forecasts will change in September. The downside price risk in corn, soybeans or wheat is not great. We remain patient for rallies.

** GFS 10 Day Rainfall Forecast:

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