USDA Report - 5/10/18

11:01 AM

Quick take: No change to old crop corn usage, old soybean usage increased 20 mbu. Estimated 18/19 corn production at 14.04 bbu, 350 mbu lower than last year's crop; 18/19 bean production estimated at 4.28 bbu, 40 mbu off last year's total. Estimated 18/19 ending stocks: 1.682 bbu of corn (in line with expectations), 415 mbu of soybeans (much lower than trade estimates pre-report).

Today's USDA report didn't come with a lot of surprises outside of soybean ending stocks (but we'll get to that soon enough). There was little change to the 2017/18 numbers outside of increasing soy crush demand, still due to the Argentine shortfall. The USDA decided not to adjust exports from last month's 2.065 bbu despite all the rhetoric that we're slowly losing business with the Chinese because of trade spats. However, US soy exports excluding China have been increasing as of late, likely due to their shortage from Brazil which is now trying to keep up with their increased demand from China. US soybean oil saw a decrease to ending stocks via increased export demand and a production bump in meal production is offset with higher domestic feeding and export usage. All wheat saw total usage fall by 6 mbu (in line with expectations), and cotton saw ending stocks fall ahead of an anticipated 7% increase to planted acres in 2018.

This May report is all about what the USDA's first run at the new crop balance sheet will look like. New corn demand is seen 175 mbu less than last year, but the half billion decrease to ending stocks from the 2017/18 crop is largely due to the anticipated 600 mbu reduction in the 2018 crop production. Of note, the USDA di use a 174 national yield, which is 2.6 bpa lower than last year. Export demand is seen down 125 mbu, even with a smaller anticipated safrinha crop (which competes with fall exports for us), and feed use was seen 125 mbu lower. There was an anticipated increase to ethanol grind despite the uncertainty that's surrounded that industry for the last few weeks with RIN waivers and E15 discussions.

Trade estimates for 2018/19 ending stocks averaged 1.628 bbu, so the USDA's number isn't too far off. Once you start playing around with national yield or moving usage numbers around, it could easily swing the ending stocks as low as 1.2 or 1.3 bbu or as high as 1.8 or even back near 2.0 bbu -- at this point that would be an exercise in futility as we still have plenty of corn acres to get planted and a long growing season ahead of us. The world production numbers were seen 20 MMT higher (763 mbu), but world corn stocks are estimated to be nearly 36 MMT lower next year (1.4 billion bushels) -- could be an interesting summer if a hot/dry pattern develops with a safrinha crop already under stress and US production needing trendline yields just to hold onto a 500 mbu decrease in ending stocks.

New crop soybean S&D numbers might be a bit more friendly than even those shrinking corn numbers. While domestically we anticipate a larger total supply next year, world demand is still increasing and world estimated ending stocks of soybeans is expected to fall 5.5 MMT year-over-year, or 200 mbu. The argument would be we'll need to see exports pick up next year, and given increasing world demand despite trade talks on-going, we're still the largest- or second-largest producer of soybeans and the other country still doesn't produce enough beans to keep all the other countries who import them full. There's a lot of moving pieces to that argument, but at face value the trade has to use the 415 mbu ending stocks number the USDA estimated until we get a better grasp on acres in the June report and long-term weather outlooks. With little old-crop soybeans left in farm hands' and a healthy dose of new-crop sales on, we could see bean prices work back towards their highs.

AG

Disclaimer: This commentary does not represent the views of Tremont Cooperative Grain Company, but rather one author's opinions. Data used in this commentary is taken from sources believed to be accurate, and is intended for informational purposes only and should not be solely used to conduct any type of trading strategy. For more information, please contact Tremont Cooperative Grain Company at 309-925-4981, or email info@tremont.coop.