- The USDA September Crop Report was neutral to slightly bearish. Chicago has rallied following the release of the report on momentum and ongoing large fund buying. We have seen nothing in the report that alters our opinions, but we would argue that WASDE keeping 2020/21 Chinese corn imports at 7.0 million mt is difficult to understand with nearly 9.0 million of sales on the books. We guess that USDA wants to make sure that the corn ships. We would strongly advise against buying into the post report Chicago rally.
- WASDE reduced 2020/21 US corn end stocks by 253 million bu to 2,503 million to account for the derecho winds across IA which cut harvested acres by nearly 500,000 and a fall in yield of 2.8 bushels/acre to 178.5 bushels/acre. US 2020/21 corn end stocks are the largest in 33 years at just over 2,500 million bu with an average farmgate price of $3.50. WASDE cut 19/20 US ethanol use to 4,855 and exports to 1,770 million bu.
US End Stocks (million bu)
Aug Sep
2019/20 2020/21 2020/21
Corn 2,228 2,756 2,503
Soybeans 615 610 460
Wheat 1,044 925 925
- Research notes that the derecho IA wind and Midwest flash drought reduced total US corn/soybean production by a combined 403 million bu with a 150 million cut from soybeans and a 253 million cut in corn. This was less than expected in both summer row crops.
- World major crop end stocks were lowered 9.9 million mt to 719.8 million, with wheat up to a new record high of 319.4 million mt, while corn was trimmed 10 million and soybeans by 1.8 million. 2020/21 world corn stocks are forecast to rise 6 million mt above last year, even with expanded world corn trade to 186 million mt.
- US 2020/21 soybean end stocks fell by 150 million bu to 460 million. Such stocks assume an annual export estimate of 2,125 million bu (445 million bu or 12.1 million mt above the prior crop year). China took nearly 17 million mt of US soybeans in 2019/20. Assuming non-China demand stays similar, this suggests that China will take 28-29 million mt from the US in 2020/21. Currently, research estimates that China has booked 22-23 million mt of US soybeans.
- US 2020/21 wheat end stocks were left steady at 925 million bu with 975 million bu of exports. The 2020/21 Russian wheat crop was left at 78 million mt with exports of 37.5 million. The Russian wheat total is too low in our opinion as Russia has already harvested more than 80 million mt. Canada’s 2020 wheat crop was raised to 36 million mt and Australia to 28.50 million. China’s 2020/21 wheat imports were raised 1 million mt to 7.0 million. The USDA wheat data leans bearish.
World End Stocks (million mt)
Aug Sep
2019/20 2020/21 2020/21
Corn 311.3 317.5 319.4
Soybeans 95.9 95.4 93.6
Wheat 300.9 316.8 306.8
- We calculate the September 2020 10-State US corn ear weight at 0.355lbs per ear or close to 2018, 2017, and 2016 averages. Our guess is that in the end, US corn ear weight could exceed 0.36lbs which would raise the US yield back above 180 bushels/acre. Traders will be looking at actual combine yield data for direction in coming weeks. The IL corn yield fell 1.9 bushels/acre to 203 bushels/acre, while the IA yield was off 5.4 bushels/acre to 191. Record corn yields were reported in 9 states (MN, SD, WI, Ml, NC, KY, SC, GA and NY). This is the first year that the MN corn yield surpassed 200 bushels/acre and Iowa by 9 bushels/acre (191 bushels/acre).
- NASS suggested in their commentary that they have included FSA program data into their September acreage calculations, but historically, NASS does not adjust US harvested/planted acres until October. Our bet is that FSA offices are still behind in their reporting which may require October or November data for confirmation.
- We see the September USDA Crop report as slightly bearish. The market has placed considerable risk premium in price based on the $1.10/bu rally in soybeans and $0.50/bu rally in corn and wheat. This is not a report to be buying. Our view remains, and that is that a seasonal top is being formed in Chicago.