- The USDA crop report is being described as mixed. The data is slightly bearish corn, and supportive to wheat and soybeans. The decline in the Russian wheat crop to 74.2 million mt (from 78 million) raised US wheat export potential. Yet, the world still has record stocks of wheat while world soybean stocks at 104 million mt being historically large. This mutes some of the market’s reaction to the data. As previously suggested, now that the report is past, it is all about Central US weather (yield) heading into the much more important August 12 USDA report.
- The USDA raised 2019/20 US corn end stocks by 142 million bu to 2,340 million bu. The increase was based on a 100 million bu cut in 2018/19 corn exports to 2,100 million and a 25 million bu drop in feed/residual to 5,275 million bu with the remainder coming from industrial use. US old crop corn stocks are now the largest since 1987 when US corn stocks were over 4,000 million bu. We anticipate another 25-50 million bu cut in 2018/19 US corn exports and based on high domestic corn prices/abundant feeding of HRW wheat, US corn feed/residual could fall another 25-50 million bu which would hike 2018/19 US corn stocks to 2,400 million bu or more. Large old crop corn stocks reflect the massive US farm holding that is ongoing.
- WASDE forecast 2019/20 US corn stocks at 2,010 million bu, a 336 million increase from June. The USDA decided to hold yield at 166 bushels/acre and raised harvested US corn acres to 83.6 million (1.2 million bu increase from June). WASDE forecast that a historically large 8.1 million acres of US corn would NOT be harvested vs last year’s 7.4 million acres in compensation to weather and latent seeding dates.
- WASDE dropped their farmgate corn price to $3.70/bu which is below December corn futures at $4.38/bu. The US futures market is carrying a considerable premium for yield and potential loss via additional Prevent Plant acres.
- Note that WASDE forecast US 2019/29 feed/residual at 5,175 million bu, just 100 million less than the current crop year with 2019/20 exports at 2,150 million bu. Research argues for further 50-150 million bu cut in the feed/residual use with new crop corn exports at 1,900 million bu, 250 million less amid record large S American and Black Sea corn supplies.
- 2019/20 world corn stocks were raised to 299 million mt, up 9 million from June based on the more abundant US corn supplies and stocks. However, such world corn stocks are still down 30 million mt from 2018/19. China corn stocks were held at a large 192 million mt while the 2019 EU corn production is forecast at 64.2 million mt. This cut EU 2019/20 corn import pace to 20 million mt, down 3 million.
- The 2019 US soybean crop was forecast at 3,845 million bu, a 699 million bu reduction from last year on a sharp decline in seedings of 9.2 million acres and a 3.1 bushels/acre drop in yield. Total US 2019 soybean supplies were forecast at 4,915 million bu. 2018/19 US soybean end stocks were raised to 1,050 million bu with exports being cut to 1,700 million bu. We would argue for a further addition of 5 million bu with 2018/19 US soybean end stocks forecast at 1,055 million bu. 2019/20 US soybean end stocks were forecast at 795 million bu assuming harvested acres of 79.3 million acres with a yield of 48.5 bushels/acre. WASDE forecast 2019/20 US soybean exports at 1,875 million bu which appears too high if the US/ China trade war persists. The US 2019/20 soy crush rate is forecast at a record large 2,115 million bu. The average farmgate cash price was raised by $0.15 to $8.40/bu. We would argue that NASS will raise 2019 US soybean seedings by 1-1.5 million acres in the August report amid farmers seeding for MFP (Market Facilitation Program) trade payment.
- US 2019 all wheat production was forecast at 1,921 million bu, an increase of 18 million with US all wheat yield rising to 50 bushels/acre. WASDE reduced US 2019 harvested wheat acres to 38.4 million acres. Total US wheat supplies at 3,133 million bu is close to last year and more than adequate for existing demand. US 2019/20 wheat end stocks were lowered to 1,000 million bu, down 72 million from June as US exports were raised 50 million to 950 million bu with feed use raised 10 million to 150 million bu. The US farmgate price was raised $0.10 to $5.20
- Adverse Central US weather is needed to rally Chicago corn, soy or wheat to new highs. The increase in old crop corn helps cushion any future decline in new crop supplies via seeding/yield. The world is still awash in wheat/soy.