12 August 2020

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  • The August USDA crop report was slightly bearish as US corn/soybean yields surpassed trade expectations. NASS estimated the 2020 US soybean yield at a record 53.3 bushels/acre with corn at 181.8 bushels/acre. The yield estimates did not come as a big surprise relative to what traders had been discussing.
  • The reaction of the market was a bounce in corn/soybeans while the wheat market slides. Traders will try to buy the slightly bearish USDA August report, but with harvest ahead, we doubt that a Chicago rally can be sustained. It is the September report that holds more market weight. NASS enumerators make their measurements in early September.
  • NASS estimated the US corn crop at 15,278 million bu, a record with the 2020 US corn yield forecast at a record large 181.8 bushels/acre. The IL corn yield was pegged at 207 bushels/acre with IA at 202 bushels/acre. Record corn yields were forecast for; WI, Ml, MN, SD, PA, KY, TN, GA and SC. The surprise was that the IA corn yield was only up 2 bushels/acre from last year at 202 bushels/acre.

US End Stocks (Mil Bu):

July                 August

2019/20           2020/21           2020/21

Corn                            2,248               2,648               2,756

Soybeans                   620                  425                  610

Wheat                         1,044               942                  925

 

  • NASS estimated 2020 US soybean production at 4,420 million bu, just below the record of 2018 at 4,430 million bu. With another bump in the US soybean yield, the US could produce a record soybean crop in 2020 with 6 million acres less than 2018.
  • Record large soybean yields were reported in; SD, Ml, IL, IN, OH, MO, KY, and LA. The IA soybean yield was estimated at 58 bushels/acre compared to IL at 64 bushels/acre which seems to be too low. With another few finishing rains, it appears that the US would have a chance of producing a 54-55 bushels/acre soybean yield.
  • US spring wheat production was increased to 577.5 million bu with US 2020 all wheat production estimated at 1,838 million bu with a yield of 50.1 bushels/acre.
  • WASDE raised their 2020/21 end stock forecast to 2,756 million bu, the largest in 33 years. WASDE raised feed/residual use by 75 million to 5,925 million bu with exports bumped 75 million to 2,225 million bu. WASDE held China’s corn imports from all origins at 7 million mt. The WASDE increase in 2020/21 demand helped offset some of the 278 million bu gain in the crop. The net result was a decline in the farmgate price average to $3.10/bu which forecasts that December corn futures will decline below $3.00 during the coming harvest.
  • WASDE estimated 2020/21 US soybean end stocks at 610 million bu, up 185 million from July as the 2020 US soybean crop grew a hefty 290 million bu. The new crop supply was the second largest on record. 2020/21 US soybean stocks are not much different from the current crop year which calls for a range trade of $8.20-9.20.

World End Stocks (MMTs):

July                 August

2019/20           2020/21           2020/21

Corn                            311.9               315.0               317.5

Soybeans                   99.7                 95.1                 95.4

Wheat                         297.1               314.8               316.8

  • USDA forecast an average US farm gate soybean price of $8.35/bu, down $0.15 from the current year. Unless China books more than 30 million mt of US soybeans in 2020/21, there is no lasting bull story for soy without a dire S American drought.
  • 2020/21 world soybean stocks at 95.4 million mt was only slightly higher than July as WASDE raised China’s soybean import estimate to 99 million mt, up 3 million. The 2021 Brazilian soybean harvest was estimated at a record large 131 million mt with Argentina at 53.50 million mt. Non-Chinese soybean trade was raised 4 million to 165.4 million mt. We. would argue that this increase is too robust in a Covid-19 world. WASDE cut their forecast for 2020/21 US wheat stocks to 925 million bu based on a 25 million bu hike in export demand to 975 million bu. This increase helped slow the decline in the US farmgate wheat price to $4.50/bu.
  • In world wheat supplies/trade, WASDE raised their estimate of 2020/21 Russian wheat production to 78.0 million mt and increased their exports to 37.5 million mt. The European wheat harvest was cut by 4.0 million to 135.5 million mt with their exports cut by 1.5 million to 25.5 million mt. WASDE held their estimate of China’s wheat crop at 136 million mt with imports of 6.00 million mt. We would argue that WASDE is too low with their crop views of Canada, Australia and Russia with further upside adjustments likely in coming monthly reports. 317 million mt of world wheat is a record stocks total. There is no evidence of a lasting world wheat rally.
  • Research sees the USDA August report as slightly bearish. Our bet is a further increase in US corn/soy yields in coming monthly reports. Rallies will be capped and Chicago prices should grind lower into mid-September to mid-October. We doubt that seasonal lows are being scored in mid-August.