FarmLead Breakfast Brief
Wednesday, August 9th, 2017
“This report, by its very length, defends itself against the risk of being read.”
– Winston Churchill (former British Prime Minister)
At 7:20 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2671 CAD, $1 CAD = $0.7892 USD)
Sept Corn: -0.3¢ (-0.05%) to $3.685 USD or $4.669 CAD
Sept Soybeans: +1.5¢ (+0.15%) to $9.685 USD or $12.272 CAD
Sept Soybean Meal (per short ton): unchanged at $309.50 USD or $392.17 CAD
Sept Soybean Oil (cents per lbs): +0.09¢ (+0.25%) to 33.96¢ USD or 43.03¢ CAD
Sept Oats: +1.3¢ (+0.45%) to $2.748 USD or $3.481 CAD
Sept Wheat (Chicago): +1.3¢ (+0.25%) to $4.583 USD or $5.807 CAD
Sept Wheat (Kansas City): +0.8¢ (+0.15%) to $4.613 USD or $5.845 CAD
Sept Wheat (Minneapolis): +2.8¢ (+0.4%) to $7.34 USD or $9.301 CAD
Nov Canola: +3.2¢/bu / +$1.40/MT (+0.3%) to $9.076/bu / $400.20/MT USD or $11.501/bu / $507.10/MT CAD
Yesterday’s Winnipeg ICE Close
Sept Barley: unchanged at $2.492 USD or $3.157 CAD
Oct Durum Wheat: unchanged at $6.744 USD or $8.546 CAD
Oct Milling Wheat: +16.3¢ (+2.2%) to $6.078 USD or $7.702 CAD
What Will the USDA August WASDE Report Bring?
Well, the day is nearly here: the August WASDE arrives tomorrow.
August 10, 2017 could be one of the more volatile reports we’ve seen in a long time.
Ahead of the report, estimates are wide-ranging, there’s a lot of debate on the “yields in the fields.”
No matter what, we know the numbers from this report will still be altered again in the next few months!
Looking at yesterday, Garrett noted in Grain Markets Today that a stronger US Dollar limited gains. This was especially true for corn, soft red winter wheat, and hard red winter wheat prices. However, soybeans showed some gains as they tried to make up for its sell-off last week. Some technical support, limited rains in the main growing areas, and robust export demand are helping the oilseed.
The F&G Report notes that from April thru the end of July, the US, Brazil, and Argentina exported 38 million tonnes of soybeans to China.  Keep in mind that it takes about one month for a ship with exports to land in China for their imports, meaning there’s always a delay between exports from one country and imports in China.
Corn and wheat remain under pressure and without perhaps some more premium built into the market, the summer highs have come and gone.
This morning, grain markets are softly higher as the US Dollar pulling back and some positioning ahead of the report tomorrow lead the complex.
Let’s get to the August WASDE pre-report guesstimates.
What to Watch For in the USDA’s August WASDE
August’s numbers are far from the final ones. Terry Reilly from Futures International is expecting September’s WASDE report to have even lower corn yield number than August’s and I admit it’s tough to disagree with him. 
Overall, U.S. yield numbers will certainly play the biggest part in the USDA’s August world supply, and demand estimates report.
We’ll also be looking for potential wheat production numbers out of the likes of Australia, Canada, Ukraine, and the European Union.
In tomorrow’s Breakfast Brief, we’ll look at some price direction potential.
The sneak peek is that things can be volatile following the USDA’s August grain report.
Later on in the day tomorrow, Garret and I will be doing a full recap of the August WASDE report in his regular afternoon column, Grain Markets Today. If you haven’t bookmarked this page on your browser, you should do so now.
Hot Corn Prices and Production
Heading into the report, the average US corn yield estimate by traders and analysts is around 160 bushels per acre. Technically, the Bloomberg poll is at 165.9 bushels per acre while Reuters’s survey results suggest 166.2 bushels per acre.
The market knows that the heat in July has had an impact on potential US corn yields.
Regardless, this would be nearly a 5 bushel per acre decline from the current USDA corn yield estimate of 170.8 bushels per acre. The range of estimates by analysts are as low as 162.8, all the way up to 168.5.
My estimate sits closer to 167 bushels per acre. The reason for my “higher’ estimates is three-fold. First, the USDA couldn’t account for the last week of hot July weather in their estimates. Second, much like unaccounted weather effects, our Doug Kirk points out that disease and crop progress issues like tip back also won’t get factored in. Finally, the August WASDE is based mainly on plant populations and only later on will it start counting ear weights, grain length, etc. 
Historically speaking, the USDA has cut US corn yields nine times in the past 20 years. 
The average decline was 4.6%, but that’s highlighted by the 15.5% drop in American corn yields in the drought of 2012. If corn yields were felled by 15.5% this year, that would suggest a 165.1 bushel per acre average yield in tomorrow’s WASDE report.
Technically-speaking, 165.1 bushels per acre would still be the 4th-best yield ever. As in, of all time.
Also worth noting is how far US corn’s good-to-excellent (G/E) ratings fell in July. The last time G/E ratings suffered this poorly in 2011 when the USDA cut yields by 5.7 bushels per acre. As Todd Hultman of DTN notes though, don’t compare corn price movement from then til now as “the two market environments could not be more different.” 
Given acreage, current average estimates would result in about a 13.8-Billion-bushel American corn crop (or 350.5 million tonnes if you’re using the FarmLead Grain Unit Converter). The USDA’s previous estimate was 14.26 Billion bushels (362.1 million tonnes or MMT).
From a carryout perspective, 2016/17 numbers shouldn’t change too much globally or domestically. The July American 16/17 ending stocks number was 2.37 Billion bushels (60.2 MMT). The market is expecting 2.386 Billion bushels (60.61 MMT). Worldwide, 16/17 carryout was estimated at 227.51 MMT in July, but the market is expecting a slight decline to 227.38 MMT.
By the end of the 2017/18 crop year, the market is expecting to see a carryout slightly above 2 Billion bushels (50.88 MMT). Last month, that number was 2.325 Billion bushels (59.06 MMT).
Globally, the market is expecting to see US production losses pushing 2017/18 ending stocks from the July estimate of 200.8 MMT down to 194.9 MMT in this report.
The Bloomberg poll has traders and estimates pegging national US soybean yields at 47.4 bushels per acre. The Reuters survey is at 47.5 bushels per acre. Just to be different, I estimate 47.6 bushels per acre. The range of estimates is from 46.9 to 48 bushels per acre, the current forecast by the USDA.
It’s worth noting that only 3 times in the past 10 years has the UDSA dropped their soybean yield number from the August to January report. 
Across all acres, a 0.5 bushel per acre decline would mean a nearly 57 million bushels (or 1.55 MMT) drop in potential production from July’s WASDE number of 4.26 Billion bushels (115.94 MMT).
With a lower yield though, average estimates of US 2017/18 soybean production is pegged at 4.212 Billion bushels (114.63 MMT)
From a carryout perspective, strong US soybean exports in 2016/17 have the market guesstimating that carryout will fall by 89 million bushels (2.422 MMT) from July’s estimate of 410 million bushels (11.16 MMT).
This means though that 2016/17 ending stocks will stay above 400 million bushels (or 10.91 MMT).
Looking at the 2017/18 carryout, the average pre-report guesstimate by the market is set at 424 million bushels (11.64 MMT). That’s a 36 million bushel (or nearly 980,000 MT) from the July WASDE forecast of 460 million bushels (12.52 MMT).
Globally, 2017/18 soybeans carryout is expected to come in at 92.12 MMT. July’s WASDE number was 93.53 MMT. America’s production decline is blamed for most of the drop.
Overall, the market isn’t expecting too many fireworks in the soybeans complex. The contrarian in me says that might be when the market is most susceptible to a significant price change.
What’s Up with Wheat?
Wheat markets had a wild ride in July, although it topped out at the beginning of the month (you can read Garrett’s July Grain markets recap here).
While we know that many farmers weren’t too happy with the spring wheat crop tour final estimates from a couple of weeks ago, they’re not going to be any happier with what we might see in the USDA’s August WASDE tomorrow.
While winter wheat numbers are pretty much baked in, it’s the spring wheat market that will likely get all the attention.
Total spring wheat production is estimated at 393 million bushels (10.695 MMT). This is down from the July forecast of 423 million bushels (11.512 MMT). For durum, there’s not too much change expected, dropping just 2 million bushels from July’s forecast of 58 million (or 1.58 MMT).
2017/18 US ending stocks will still be high at 907 million bushels (24.684 MMT). That number is a 31 million bushel drop the July forecast of 938 million bushels (25.53 MMT). It’s worth noting that there are some pre-report estimates as low as 806 million bushels (21.935 MMT).
Keep in mind, that the USDA doesn’t account for high-protein stocks. We certainly believe there are significant opportunities for high-quality wheat through the rest of 2017. This means, get your wheat tested as soon as it comes off.
Globally, 2017/18 wheat endings stocks are expected to come in at 256.69 MMT, or about 1 million below the July WASDE forecast. We see production in the Black Sea and Europe making up for potential losses in American, Australia, and Canada.
Perhaps the USDA will tell us differently tomorrow at noon EDT though. Check back with Garrett in his Grain Markets Today Column on Thursday, August 10th t0 find out.
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.