- The July WASDE report was viewed as slightly bearish soy and bullish on the grains. The 2018 July WASDE report has been one of the most anticipated July reports in recent years, as the USDA incorporated their “best guess” on US and World soy trade flows based on the imposition of tariffs by China and a host of other countries. The fear was that WASDE would make larger cuts to US row crop exports. In fact, WASDE increased US corn and wheat exports, while cutting soybeans. WASDE indicated that they expected the tariffs to stay in place for the crop year covered. Thus, the marketplace should have some comfort that WASDE has make their best attempt in digesting the ongoing and deepening trade wars. The best estimate of WASDE was to forecast at 150 million bu increase in US grain exports and a 250 million bu decline in US soybeans in the 2018/19 crop year. The net result was a 100 million bu net decline via the ongoing trade war. This means that following the recent decline, the marketplace can get back to trading fundamentals, such as Central US weather and world crop sizes. The focus on the marketplace will now be more on US row crop yields. WASDE forecast 2018/19 US corn end stocks at 1,552 million bu, a 25 million decrease from June. WASDE increased US corn exports by 125 million bu to 2,225 million, below this year’s 2,400 million bu.
- WASDE lowered world corn production in both crop years with smaller crops in Russia, Brazil and Ukraine. This raised the US corn export outlook. Research argues that WASDE is still too low with its 2018/19 US corn export estimate and that a further gain of 125-175 million bu lies in the offing. We see no reason why 2018/19 US corn exports cannot equal the current crop year. And further production cuts lie in the offing for the FSU-12 and Latin America. Also, WASDE lowered US corn 2017/18 corn end stocks by 75 million bu based on better exports and food/industrial use. The increase offset a slight drop in feed and residual. 2017/18 US corn end stocks were lowered to 2,027 million bu. The industry argues for a 2018 US corn yield of 180 bushels/acre which would add another 370 million bu to US production which would raise 2018/19 US corn end stocks to 1,925 million bu. Such stocks argue that December corn below $3.40 is undervalued. The WASDE report confirms a brightening price outlook for corn. US 2018 wheat production was raised to 1,881 million bu, an increase of 54 million bu with old crop stocks pegged at 1,100 million bu, an increase of 20 million. Amid a 25 million bu rise in US 2018/19 US wheat exports to 975 million bu, US 2018/19 wheat end stocks were pegged at 985 million bu, a 115 million drop from the current crop year. Research sees additional upside in US wheat exports amid a fall in world wheat production of 9.3 million mt. US wheat exports could grow another 50-75 million bu, but the current sales pace is disappointing. The 2018 Russian wheat crop was reduced to 67.0 million mt, down 1.5 million, with the EU wheat crop off 4.4 million mt to 145 million mt. The Ukraine crop was down 1.0 million with Australia off 2 million to 22 million mt. The major world wheat exporter stock/use ratio has fallen below that of 2007, a bullish development.
- In soybeans the USDA raised the forecast for US old crop 2017/18 soybean exports by 20 million bu to 2,085 million bu, and added 15 million to the crush forecast. Old crop stocks were lowered by 40 million bu. In the new crop estimates the USDA raised the crush forecast by 45 million bu to a record large 2,045 million bu, while slashing new crop exports by a massive 250 million bu. The sharply lower export total raised 2018/19 new crop stocks by 195 million bu to 480 million. The season average price range forecast was lowered by $.75/bu to $8-10.50 with a midpoint of $9.25 Old crop Chinese soybean imports were unchanged at 97 million mt, while the new crop forecast was slashed by 8 million to 95 million mt. Despite the sharp drop in Chinese soybean imports total world oilseed trade was lowered by just 5.8 million mt. The USDA did not raise the forecasts for production/imports/consumption of other non soy protein meals for China. Brazilian 2018/19 soybean exports were increased by 2.25 million to 75 million mt. Argentine exports were unchanged at 8 million mt. Argentine 2017/18 soybean crush was lowered by 1 million to 39.2 million mt and 2018/19 was down 1 million at 43 million mt. Additional cuts were made to Argentine soymeal and soyoil forecasts in both old and new crop. A bearish soy report was widely expected amid larger crops and declining world trade. However, the July WASDE also helps alleviate some of the uncertainty that has hung over the soy markets as it provides a starting baseline and framework for world trade flows that Chicago and world cash market can now measure against.