- The August USDA Crop report was bearish corn with soybeans and wheat caught up in its bearish undertow. US farmers are likely to start more aggressively shedding old crop stocks ahead of the new crop harvest. The report was a sizeable step in confirming that annual highs were likely scored in June with fund long liquidation in corn likely to accelerate. The next potential upside surprise comes with the September report and objective measurements of the US corn and soy crop sizes.
- NASS forecast 2019 US corn planted acres at 90 million (down 1.7 million acres from June, but still 2 million acres above expectations) with harvested acres pegged at 82.0 million. There is still the potential for US corn acres to decline farther in the October and final estimate, but the market’s focus now shifts totally to yield. That debate will heat up closer to harvest.
- NASS forecast ‘19 US soy planted acres at 76.7 million acres, down 4.3 million from expectations. Such US soy seedings are the lowest since 2007. US soybean seeding is the lowest since 2007 when the US farmer seeded just 64.7 million acres. The US seedings fall is bullish of soybeans via supplies.
- NASS forecast US ’19 corn yield at a lofty 169.5 bushels/acre, up 3.5 from July based on farmer surveys and satellite data. This yield would be just 7 bushels/acre below trend with the IL corn yield at 181 bushels/acre, IA at 191 bushels/acre and IN at 166 bushels/acre. We would argue that this yield appears at least 3-5 bushels/acre too high, but based on US planted/harvested acres, a US corn yield less than 155 bushels/acre is needed to spark a run at the June highs. Amid the better corn crops in the Plains and the W Midwest, reaching such a low US crop yield is a “stretch” today.
- The US August soybean yield at 48.5 bushels/acre is right at the July WASDE forecast and like corn, is likely too high amid unfavourable August weather. However, adjustments will only be made when actual harvest data is available from the field in late September. We see the US final soybean yield at 46.5-48 bushels/acre.
- WASDE forecast 2018/19 corn end stocks at 2,360 million bu, an increase of 20 million with 2019/20 corn stocks at 2,181 million bu, and increase of 171 million, down only 179 million bu from the current crop year. WASDE lowered its US corn 2019/20 average price to $3.60, down $0.10 from this year. We would argue that WASDE is still too high by 150-200 million bu with US 2019/20 corn exports based on prevailing world stocks and fob price offers. December Chicago corn has downside price risk to $3.70-3.80 for a short term bottom with higher prices thereafter depending on yield results and the length of the growing season.
- US 2018/19 soybean end stocks were raised to 1,070 million bu, up 20 million as the US crush rate was lowered. US new crop soybean stocks were forecast at 755 million bu, which was down 140 million bu from July. We note that US ’19 total soy demand was lowered 104 million bu due to a 100 million bu decline in exports. China’s old crop imports were cut to 83 million mt with new crop at 85 million. Research argues for deeper cut in 2019/20 China soybean imports to 80 million mt or less amid the expansion of ASF and their reduced feed demand.
- US 2019/20 wheat end stocks were raised 14 million bu to 1,014 million bu with the average cash price lowered to $5.00. US 2019 all wheat production was raised 59 million bu to 1,980 million bu. Research argues that US 2019/20 wheat exports are overstated by 50 million bu due to acute competition in world wheat trade. US 2019/20 wheat end stocks are likely to remain between 1,050-1,100 million bu. Chicago rallies will struggle, and we see no real demand story for US wheat into 2020.
- WASDE forecast 2019/20 world wheat stocks at a record large 285.5 million mt with a Russian wheat crop of 73 million mt and European harvest of 150 million mt. World wheat trade was reduced to 182.6 million mt amid slowing world GDP rates.
- WASDE forecast 2019/20 world corn stocks at 307.7 million mt, down 20 million from last year amid a 16 million mt decline in Chinese corn stocks.