USDA Report - 7/12/18

11:01 AM

Market moving news: initial glance shows a bullish corn report despite crop being rated better than last year/average yet soybean picture seems to be bearish, just moving higher on backs of corn/wheat. World ending stocks in corn lower than expected, big jump in soybean ending stocks though.

Looks like corn bulls should have enough to keep them satisfied for a bit with latest updates from USDA. Updated demand tables show smaller carry-in of the 2017/18 crop with increases to ethanol use and exports accounting for much of the 75 mbu reduction. The smaller beginning stocks number only slightly offsets the increase in acreage and production from the 2018/19 crop, and total supply is projected at 16.307 billion bushels. The cheaper prices of feed worked into the USDA's estimates with an increase in feed demand, but they're showing a 50 mbu decrease to ethanol grind. However, the low prices do help bump the expected export demand up another 125 mbu to 2.225 bbu, reducing the 2018/19 ending stocks to 1.552, or 25 mbu lower than the June estimate.

Falling new crop soybean demand coupled with larger acres is pushing the soybeans into an even bigger bearish picture. The 2017/18 balance sheet reduced ending stocks by 50 mbu with increases to exports and crush, most of which is offset by the increase in acres from the June 30th report. Small increases to crush on the 2018/19 balance sheet weren't enough to offset the expected 250 mbu reduction from 2.290 bbu reported in June to the now-2.04 bbu expected exports (hence the bean picture should be looking bearish). Now granted, most of this hinges on the US-China trade relations in the coming year, and cheap prices do speak for themselves, yet as we sit now, the US soybean picture is not looking as good now.

Updated estimates of the South American crop were released, as well, with the USDA being a little friendlier to their Brazil soybean estimates than CONAB was (119.5 MMT vs 118.9 MMT, difference of about 22 mbu), and a small bump in the Argentina soybean production of about 10 mbu --- both of these numbers aren't really enough to shift the world soybean demand picture. The Brazilian corn crop was estimated to be another 82 mbu smaller and more in-line with CONAB's estimates.

Updated Chinese production estimates: corn production up 10 MMT year-over-year (about 400 mbu, same estimate as last month), soybean imports down 2 MMT YoY and 8 MMT (about 300 mbu) lower than June's estimates. Thought here is with a growing population, how is their protein demand lower? Maybe the USDA will come back and adjust this number if the trade/tariff talks work themselves out and coupled with an increase in US exports, wouldn't have such a big net-effect on world ending stocks numbers….

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.