By Todd Hultman
DTN Lead Analyst
After five weeks of dark offices, USDA’s lights are back on and the department is ready to issue final corn and soybean crop estimates for 2018, new crop estimates for South America, Dec. 1 grain stocks totals and an estimate of winter wheat seedings. The excitement begins at 11 a.m. CST on Friday, Feb. 8, and promises to have something of interest for almost everyone.
The last time USDA released a World Agricultural Supply and Demand Estimates (WASDE) report, many of us hadn’t even started Christmas shopping yet and some were relieved to have finally finished harvest after encountering wet fields. This time, many are expecting those adverse harvest conditions to result in slightly smaller crops than what USDA estimated in December. Dow Jones’ pre-report survey of analysts expects USDA to reduce the 2018 corn crop from 14.626 billion bushels (bb) to 14.509 bb, based on a yield of 177.6 bushels per acre on 81.7 million harvested acres. The same survey expects USDA to reduce the estimate of U.S. ending corn stocks from 1.781 bb to 1.714 bb — too small of an adjustment to anticipate much change in corn prices.
USDA’s estimate of world ending corn stocks is also expected to be reduced a small amount, from 308.8 million metric tons (mmt) to 307.5 mmt (12.1 bb) for 2018-19, according to Dow Jones’ survey. Brazil is just starting to plant their safrinha corn crop, and things are going well enough for Dow Jones’ analysts to anticipate larger total harvests from both Brazil and Argentina — 93.3 mmt (3.67 bb) and 43.1 mmt (1.70 bb), respectively.
The one report that is most vulnerable to surprise on Friday, and has the potential to steal the spotlight, is USDA’s report of Dec. 1 grain stocks. For corn, analysts are expecting USDA to find 12.117 bb on hand, down from 12.567 bb a year ago. If true, corn demand will have achieved a new record high in the first quarter of 2018-19, thanks to a stronger export pace. If corn stocks turn out higher than expected, two suspects that may have hurt corn demand are ethanol and competition for feed demand from sorghum.
Like corn, U.S. soybean production is also expected to be trimmed in Friday’s report. Dow Jones’ survey expects USDA to reduce its estimate of 2018 soybean production from 4.600 bb to 4.558 bb, based on a yield of 51.7 bushels per acre on 88.2 million harvested acres. Given the harshness of fall conditions in several soybean areas, an estimate closer to 4.500 bb is not unreasonable.
With a lower crop estimate, a lower ending stocks estimate is likely to follow. Dow Jones’ survey sees a modest reduction from 955 million bushels (mb) to 920 mb. After throwing out the highest and lowest estimates, the range of guesses among analysts was surprisingly narrow, spanning from 880 mb and 971 mb. I suspect many of us are anticipating USDA will refrain from changing export estimates until the export sales data is fully available on Feb. 22.
USDA’s estimate of world soybean stocks for 2018-19 is expected to come down a little, from 115.3 mmt to 113.9 mmt (4.19 bb) with extra attention on Brazil. Dow Jones’ survey expects USDA to reduce its estimate for Brazil’s soybean crop from last year’s 120.3 mmt to 116.3 mmt (4.27 bb) in 2018-19. Analysts expect Argentina to have a much bigger crop this season, 55.0 mmt (2.02 bb) versus 37.8 mmt a year ago.
There may be no more difficult task for analysts in 2018-19 than estimating U.S. soybean demand, and Friday’s Grain Stocks report will give us the first solid evidence for the new season. Dow Jones’ survey expects USDA to find 3.687 bb on hand in the U.S. as of Dec. 1. If true, that will be the lowest first-quarter disappearance of U.S. soybeans in five years. That is not a surprise given China’s steep tariff, but does add weight to soybeans’ bearish narrative in early 2019.
Compared to corn and soybeans, changes to wheat estimates in Friday’s reports are likely to be mild and, not surprisingly, are likely to lean bearish. According to Dow Jones, the estimate of U.S. ending wheat stocks is expected to increase from 974 mb to 993 mb for 2018-19. If, as I suspect, USDA leaves export estimates unchanged in February, there is a chance the U.S. ending stocks estimate for wheat doesn’t change at all.
USDA is expected to reduce its estimate of world ending wheat stocks only slightly, to 268.0 mmt (9.85 bb). Candidates for possible crop adjustments include Russia, Europe, Argentina and Australia, but no major changes are expected.
The average estimate of Dec. 1 U.S. wheat stocks from Dow Jones is 1.952 bb, up from 1.873 bb a year ago, as it is no secret that U.S. wheat exports were disappointing in the first half of 2018-19. If the estimate is correct, demand for wheat in the first half of the season will be its lowest in nine years.
Just as fall harvest conditions were problematic for corn and soybeans, planting conditions were also a challenge for winter wheat. USDA is expected to estimate U.S. winter wheat seedings at 32.0 million acres for 2019-20, down slightly from last year’s 32.5 million acres. Any estimate below last year’s total will be the lowest planting since 1909. But don’t expect much of a reaction from wheat prices. U.S. winter wheat accounts for a little more than 4% of the world’s wheat production.
Friday’s reports will have a lot of new information and possibly a surprise or two. Stay tuned to DTN Friday as we bring you the latest numbers shortly after USDA’s reports are released at 11 a.m. CST.
At noon CST Friday, join DTN’s post-report webinar where I will be explaining what the day’s numbers mean for grain prices. Sign up now for Friday’s webinar at: https://dtn.webex.com/…
|U.S. CROP PRODUCTION (Million Bushels) 2018-2019|
|QUARTERLY STOCKS (million bushels) as of 12/1/18|
|Dec 18||Avg||High||Low||Sep 18||Dec 17|
|U.S. ENDING STOCKS (Million Bushels) 2018-2019|
|WORLD ENDING STOCKS (Million metric tons) 2018-2019|
|WORLD PRODUCTION (million metric tons)|
|WINTER WHEAT SEEDINGS (million acres) 2019-20|
Todd Hultman can be reached at firstname.lastname@example.org
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