July 12 – July WASDE Report Just Points Us to August

Grain prices on the futures board are quietly mixed following yesterday’s July WASDE report, which the market sort of yawned at and instead, circled Monday, August 12th on their calendars.

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July 12 – July WASDE Report Just Points Us to August

Grain prices on the futures board are quietly mixed following yesterday’s July WASDE report, which the market sort of yawned at and instead, circled Monday, August 12th on their calendars. [1]

Grain prices are recoiling from yesterday’s finish in the green, but analysts and traders are looking already to the date that the August WASDE report will be published, when it’s expected to include updated acreage data from the USDA. Right on cue, there was more shouting from the rafters about how irrelevant some of the USDA reporting has become. [2] That being said, grain markets all finished in the green yesterday, including wheat prices climbing double digits.

Also on the reporting front, the quarterly financial results for the likes of Bunge and ADM are starting to show the impact that the U.S. trade war and spring flooding as had. [3] The shares for the aforementioned companies are hovering just above the three-year lows seen this past spring, and with demand for U.S. corn seemingly weakening (as suggested in yesterday’s July WASDE report), there are questions if a quick share price rebound is even possible. While Cargill still made $235M in profit last quarter, that’s a 67% drop from the same quarter a year ago. [4]

International July WASDE Report Data

Globally, corn ending stocks were raised in the July WASDE report by nearly 8.5 MMT to just under 300 MMT, mainly because of bigger production in the United States and Argentina. It was the opposite though for soybeans as global carryout was lowered by 8.13 MMT, mainly because of the 8.3 MMT reduction for the 2019/20 American soybean harvest.

July WASDE report results for U.S. grain production & carryout

In South America, the corn crop is looking bigger. While Brazil’s corn harvest was stayed at a record 101 MMT, Argentina’s 2018/19 corn harvest was raised by 2 MMT to 51 MMT. I mentioned in Wednesday’s FarmLead Breakfast Brief ahead of the July WASDE that the country’s official corn production estimate in Argentina was raised to 57 MMT, so maybe the USDA will make further additions?

For South American soybean production, nothing changed for 2018/19, but it’s worth reminding you that the USDA is currently expecting next year’s harvest to come in at 53 MMT in Argentina and a record 123 MMT in Brazil.

Digging into the oilseed complex further, the USDA literally titled their global oilseed report, “Market Uncertainties of 2018/19 Haunt 2019/20 Prospects.” [5] This is an obvious reflection of the U.S.-China trade war, notably how many South American soybeans have been heading to China, instead of boats from the United States. In fact, the USDA increased Brazilian soybean exports for 2019/20 by 1 MMT to 76 MMT. Conversely, the USDA lowered 2019/20 U.S. soybean exports by 2.041 MMT (or 75 million bushels) to 51.03 MMT.

As it relates to canola for the current 2018/19 crop year, Chinese imports were dropped in the July WASDE report by 150,000 MT to 3.85 MMT, with the USDA noting a “slowing pace of trade” for the oilseed to the People’s Republic. Australian 2019/20 canola exports were lowered by 400,000 MT to 1.9 MMT, indicating an opportunity that either Black Sea rapeseed or Canadian canola could take advantage of. That said, 2019/20 Canadian canola production is still pegged by the USDA at 20.1 MMT, a number that I think is about 1.5, maybe 2 MMT too high, given the canola crop’s condition in Western Canada right now.

On that note, the heat has been noted by the USDA for wheat production in Canada as they lowered their forecast in the July WASDE report in the Great White North, as well as in Australia, Russia, and the Ukraine (as shown in the table above). On the trade front, we saw a bit of an update for wheat exports, with Australia’s 2019/20 shipments lowered by 1 MMT to 12.5 MMT, while US wheat exports were increased by 1.37 MMT to 25.9 MMT. Europe’s wheat exports were also increased by 500,000 MT to 27 MMT, but Russia was dropped by 2.5 MMT and Ukraine by 500,000 MT, a reflection of the expected lower wheat production in the Black Sea.

July WASDE Report Shows Little Update for U.S.

For corn in the United States, 2019/20 ending stocks came in above pre-report guesstimates, thanks to larger-than-expected production and a bigger carryover from 2018/19 than what the market was expecting. U.S. corn yields in the July WASDE report were stayed at 166 bushels per acre but the average American soybean yield was dropped by 1 bushel per acre to 48.5, which significantly downgraded production to the tune of 305 million bushels. Check out the table below for all trade data for the U.S. from yesterday’s July WASDE report.

July WASDE report results for U.S. grain production & carryout

U.S. wheat yields were raised by 1.3 bushels per acre to 50, but some stronger demand, both domestically and internationally (as mentioned) should offset the increase in production. As such, 2019/20 U.S. wheat ending stocks were lowered by 72 million bushels (or 1.96 MMT if converting bushels into metric tonnes). It’s worth mentioning that both U.S. durum and spring wheat production will be lower than last year, thanks to a lower harvested area. For HRS wheat production, 542M bushels (or 14.75 MMT) forecasted for the 2019/20 harvest would be down nearly 8% year-over-year. For durum wheat production of 58M bushels (or 1.579 MMT), this would be a 25% decline from last year’s harvest!

Overall, while grain prices finished the day in the green, yesterday’s July WASDE report should be taken with a grain of salt. This is mainly because of the inaccurate data in it, especially for the U.S. side of things. We know seeded corn acres will be lowered from the 91.7M suggested in the June acreage report. There is also a good chance that corn yields will also be lower. On the flipside, soybean acres are likely to increase, but, given the current quality conditions, we should probably expect yields to be reduced from the 48.5 bushels per acre that was suggested by the USDA. What this all does is point to Monday, August 12th. [6] This is when we’ll see the August WASDE report published, and with some major acreage changes in the U.S., it’ll be pretty hard to yawn at it.

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

At 7:25 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3034 
CAD, $1 CAD = $0.7673 USD)

Sept Corn: +0.3¢ (+0.05%) to $4.445 USD or $5.793 CAD
Aug Soybeans: unchanged at $8.99 USD or $11.717 CAD
Aug Soybean Meal (per short ton): unchanged at $312.40 USD or $407.17 CAD
Aug Soybean Oil (cents per lbs): -0.16¢ (-0.55%) to 28.02¢ USD or 36.52¢ CAD  
Sept Oats: -1¢ (-0.35%) to $2.793 USD or $3.64 CAD
Sept Wheat (Chicago): -1.5¢ (-0.3%) to $5.20 USD or $6.777 CAD
Sept Wheat (Kansas City): -1.3¢ (-0.25%) to $4.628 USD or $6.031 CAD 

Sept Wheat (Minneapolis): -2.8¢ (-0.5%) to $5.385 USD or $7.019 CAD
Nov Canola: -1.1¢ (-0.1%) to $10.131/bu / $446.70/MT CAD or $7.773/bu / $342.73/MT USD

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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