- The USDA November crop report offered a bullish surprise for US corn and soybeans, but a sharp rise in prior year Chinese corn and wheat production and stocks has created a downdraft following an early Chicago rally. The Chinese and world stocks increase does not change the outlook for US corn, soybean or wheat prices since they (China) are not exporters, but the algorithms reading trading platforms took the world stocks as bearish-which created a whipsaw market.
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US Major Grain Stocks – million bu |
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October |
November |
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2017/18 |
2018/19 |
2018/19 |
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Corn Soybeans Wheat |
2,140 438 1,099 |
1,813 885 956 |
1,736 955 949 |
- The world table below reflects the big revisions that WASDE produced in China and world end stocks. WASDE raised China’s 2018/19 wheat end stocks by 7.4 million mt to 143.6 MMTs – which now accounts for a record 54% of all world wheat stocks. In corn, WASDE raised China’s corn stocks to by a record 149 million mt to a record large 207.50 million mt. These huge corn stocks have been rumoured for years by the private trade. World 2018/19 corn stocks now stand at 307.5 million mt with China accounting for 68% of that total. We would note that China will not be exporting corn/wheat to the world marketplace. The big statistical supply/stocks increase is cosmetic in terms of what it means for US/world corn/wheat prices, which is why WASDE raised their US corn farmgate price and held soybeans steady. The US 2018 corn yield was lowered to 178.9 bushels/acre with production cut by 152 million bu 14,626 million bu. The cut argues for a further drop in US corn yield and production in January. A final 2018 US corn yield of 176-177 bushels/acre is reasonable. The US 2018 soybean yield dropped to 52.1 bushels/acre with production falling by 90 million bu to 4,600 million bu. This crop is 189 million bu larger than last year. A final US soy yield of 51.8-52.0 bushels/acre is reasonable. Chinese 2018/19 soybean imports were cut by 4 million mt to 90 million which dropped US soybean exports to 1,900 million, down 160 million bu from October,
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Woeld End Stocks – million mt |
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October |
November |
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2017/18 |
2018/19 |
2018/19 |
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Corn Soybeans Wheat |
198.2 96.7 274.9 |
159.3 110.0 260.2 |
307.5 112.1 266.7 |
- In world wheat, WASDE cut their Australian crop estimate by 1 million to 17.5 million mt and reduced their exports by 1.5 million to 11.50 million mt. WASDE did not alter Russian wheat production or exports, nor did they reduce EU wheat exports which were steady at 23.0 million mt. We would argue that WASDE is too high by 3-5 million mt on EU wheat exports based on strong domestic feed prices and an extremely slow start of the export campaign. And Aussie wheat exports should probably be lowered to 8-9 million mt. Major world wheat stock/use ratios are near a record low. Finally, the Ukraine corn crop was raised to 33.5 million mt. Ukraine 2018/19 corn exports where raised by 2 million mt to 27 million which caused the 25 million bu reduction in the 2018/19 US corn export estimate. The historical revisions of China corn, wheat and soybean production was due to their census survey last year. For years, private traders have argued that USDA was underreporting Chinese stocks. In May, WASDE toyed with the idea of producing a world balance sheet excluding China. Following today’s report, the time for such a report is now as China’s huge corn/wheat stocks mask the bullish tightening of other exporter/end user stocks which is occurring. This is no place to be turning bearish and making sales in our opinion. We do not see world wheat prices declining significantly, if at all, on this WASDE report and US wheat prices are competitive in the world export market. In corn, US yields are likely to decline farther, while the soybean market is oversupplied, but there is the late November G20 meeting occurring between US President Trump and Chinese President Xi. The lows for the day were likely formed on Algorithm fund selling as big increase Chinese stocks were announced. In the days ahead, firming grain markets are expected.