- Today’s USDA crop report was initially seen as positive with Chicago corn, wheat and soybeans all a touch firmer but soybeans traded lower into the close. We doubt the data will cause any major trend breakout until such time as we see more information on N Hemisphere growing conditions and potential yields.
- NASS put their 2017 US all wheat output at 1,820 million bu, almost 500 million bu below last year. This is the largest year on year (non-drought) decline. Interestingly NASS pegged US winter wheat yield at 48.8 bushels/acre, just above trend. It is estimated that around 1.3 million acres of wheat will not be harvested in Kansas, some 16% of the total, and no-one at this time is able to quantify or define what damage will result from cold weather.
- US 2017/18 wheat end stocks are forecast at 914 million bu, down 245 million from last year, and we would anticipate further downside adjustments due to fungal disease and post-freeze downgrades. Global 2017/18 wheat stocks were pegged at 258.3 million mt, a record large figure, which moderated bullishness emanating from the decline in US stocks.
- We note that WASDE forecast the 2017 Russian wheat crop at 67 million mt (down 5.5 milion), the EU wheat crop at 151 million mt (up 5.5 million), Indian wheat at 97 million mt (up 10 million) with China at 131 million mt (up 2.2 million). Of note is the fact that China holds a record 128 million mt of wheat or 50% of the world stocks total. China will not export wheat so some of the sheer size of world wheat stocks is attributed to China’s 2017/18 wheat stocks rising 18 million mt. World wheat exporter wheat stocks are declining which is price positive.
- US 2017/18 corn end stocks are projected at 2,100 million bu, which is down 185 million from last year via smaller 2017 seedings. NASS used a corn trend yield at 170.7 bushels/acre and reduced 2017/18 US corn exports to 1,875 million bu due to record large S American corn harvests. World 2017/18 corn stock were pegged at 195.3 million mt, down a hefty 28.6 million from last year. 2016/17 world corn production was raised 12 million mt to 1,065 million mt. World 2017/18 corn domestic use is record large at 1,062 million mt!
- 2017/18 US soybean end stocks were pegged at 480 million bu with the old crop lowered to 435 million bu. WASDE pegged 2017/18 US soybean exports at a record large 2,150 million bu and raised old crop exports to 2,050 million bu. World 2017/18 soybean end stocks were forecast at 88.8 million mt, down 1.3 million. WASDE raised China’s 2016/17 soybean imports to 89 million mt (arguably still 2 million too low) with 2017/18 imports at 93 million mt (also likely too low by 2-3 million mt). Brazil’s 2018 soybean crop was pegged at 107 million mt and Argentina at 57 million mt. The 2017/18 soybean stock/use ratio is 25.8%, down from this year’s 27%.
- Today’s report appears to offer a support peg to Chicago prices with no sharp decline in price seen until mid to late June when more is known about 2017 US wheat and corn crop potential. China will remain more active in new crop purchasing and US 2017/18 end stocks of 480 million bu demands that a one bushel/acre loss in yield will justify prices above $10.15/bu.
- Right now current US wheat looks too cheap and the volume of US soybean meal exports looks more than supportive to soybean prices.