Aug 15 – What WASDE Report?

FarmLead Breakfast Brief

Monday, August 15th, 2016

“How easily some light report is set about, but how difficult to bear.”

– Hesiod (ancient Greek poet)

Good Morning!

At 7:10 AM CDT in the North American futures markets:

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.2922 CAD, $1 CAD = $0.7739 USD)

Dec Corn: +3.8¢ (+1.15%) to $3.368 USD or $4.351 CAD

Nov Soybeans: +15.8¢ (+1.6%) to $9.998 USD or $12.919 CAD

Oct Soybean Meal (per short ton): +$4.00 (+1.2%) to $334 USD or $431.60 CAD

Oct Soybean Oil (cents per lbs): +0.66¢ (+2.05%) to 32.82¢ USD or 42.41¢ CAD

Dec Oats: +3.3¢ (+1.8%) to $1.845 USD or $2.384 CAD

Dec Wheat (Chicago): +2.5¢ (+0.55%) to $4.425 USD or $5.718 CAD

Dec Wheat (Kansas City): +0.8¢ (+0.15%) to $4.43 USD or $5.724 CAD

Dec Wheat (Minneapolis): +2.8¢ (+0.55%) to $5.188 USD or $6.703 CAD

Nov Canola: +2.8¢ / +$3.60/MT (+0.8%) to $8.162/bu / $359.86/MT USD or $10.546/bu / $465/MT CAD

Friday’s Winnipeg ICE Close

Oct Barley: unchanged at $2.325 USD or $3.005 CAD

Oct Durum Wheat: unchanged at $5.497 USD or $7.103 CAD

Oct Milling Wheat: +5.4¢ (+0.95%) to $4.465 USD or $5.77 CAD

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What WASDE Report?

Grains this morning are mostly in the green as the market continues to digest forecasts for moisture events in eastern regions of North America (where they need it, namely Ohio, Indiana, Michigan, & Ontario) and Friday’s WASDE report from the USDA. Going into the report, most of the market was expecting the U.S.D.A. to update U.S. average yields to 170.6 bu/ac for corn and 47.5 bu/ac beans, but, per their usual style, the crew in Washington, D.C. made the market take a second look as, they came in at 175.1 bu/ac for corn and 48.9 bu/ac for soybeans! While those numbers appear bearish on paper, some decent demand figures, especially for soybeans, kept the market relatively unchanged by end of trading on Friday. From our perspective, either the market doesn’t believe the bearish numbers (I think that they are a bit high myself) or the market is already pricing in a crop near these numbers and managed money is holding the line.For the US corn crop, the new record yield suggests a record crop of 15.2B bushels (compared to 14.757 Billion expected), up an incredible 11% from 2015. For a 2016/17 carryout, the bigger crop means a 41% jump from 2015/16 ending stocks to an even-more incredible 2.4B bushels. For the USDA, this translates to an average forecasted price of $2.45 to $3.45 per bushel for the 2016/17, prices that not many farmers or ag lenders are too happy to look at. Global corn production is expected to be 5.3% higher from last year to 1.01B tonnes, and thanks to competition from wheat, 2016/17 ending stocks are expected to be 5.5% higher at 220.8M tonnes. Brazil’s corn crop in 2015/16 got hit hard with drought, down almost 20% from 2014/15 to 68.5M tonnes, however, with record prices available, more acres are expected to get planted in 2016/17, which is why production for this new crop year is pegged at 80M tonnes. Corn production in Argentina in 2016/17 is forecasted by the USDA to be up 30% year-over-year to 36.50M tonnes. In Canada, with dry weather eating up fields in Ontario, only 12 million tonnes of maize are expected to be harvested in 2016/17, a decline of 12% in production from last year.

For soybeans, the USDA is forecasting average prices between $8.45 and $9.10/bushel, a 40 cent drop from their July estimates. With a record average yield forecasted for beans too, a record crop of 4.06B bushels is also suggested (or 110.5M tonnes)! From a global standpoint, Brazil will continue to compete with the U.S., as they’re projected to take off 103M tonnes of soybeans in 2016/17, while Argentina will harvest 57M. In terms of other oilseeds, Canadian canola production this year was set by the USDA to 17.6M tonnes, with many questions around disease affecting this final number. While we expect a smaller final output number, the USDA is forecasting canola exports from the Great White North to drop 8% in 2016/17 to 9.4M tonnes, mainly because of China’s state reserve auctions increasing and the looming September 1st deadline of China’s 1% max dockage tolerance on imports. Elsewhere, the EU is seen producing 20.6M tonnes of rapeseed in 2016/17 (-7% year-over-year) while good growing conditions in Australia are suggesting one of their biggest crops in the past decade with exports set at 2.7M tonnes.

For wheat, total US production was pegged at 2.32B bushels, up 13% from last year, with an average yield of 52.6 bu/ac, a very impressive 20% or 9 bu/ac increase from 2015. Looking at the global balance sheet, wheat production got a big boost to a record 743.4M tonnes, and although there’s some additional demand in the market (thanks low prices….), global ending stocks for 2016/17 will jump 4.5% year-over-year to 252.8M tonnes (that’s a new record). Pretty much all the major producers got an upgrade in terms of output from last year except for the E.U., which we’ll see an 8% decline in output from last year’s record crop to 147.5M tonnes (this is still near the 5-year average though so do not think that it’s a disaster by any means in terms of production). Looking at specific wheat producers outside of the European Union in the WASDE, Argentina is expecting to take off 14.4 million tonnes (+27% from 2015 thanks to no export taxes anymore), Australia with 26.5 million tonnes (+8%), and 30 million tonnes in Canada (+9%) despite some questions over lost acres to Mother Nature. Black Sea wheat production up an incredible 10% over last year’s big crop, with 72 million tonnes coming of in Russia (+18% year-over-year, although there are some quality questions), 15 million in Kazakhstan (+9%), and 27 million tonnes in Ukraine (despite much lower acres).

Overall, the report appeared to be a non-event and we’re back to watching weather forecasts and last half of August crop tours. These tours are much more likely to show a good idea what’s actually coming up in the fields and, subsequently get some better reactions from the market, than Friday’s USDA report, or apparently lack thereof.

To growth,

Brennan Turner

President/CEO | FarmLead
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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.

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