Grain markets this morning are mixed after the USDA released its July WASDE report yesterday, which, as per usual, provided a reset of the goalposts.
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July WASDE Provides Mixed Support for Grain Markets
Grain markets this morning are mixed after the USDA released its July WASDE report yesterday, which, as per usual, provided a reset of the goalposts when it comes to global agricultural supplies and demand.  This report stood out mainly because it gave a strong indication of just how the implementation of a trade war is influencing flows of commodities around the world.
Our Garrett Baldwin provided real-time analysis of the July WASDE report as it came out. Corn prices and soybean prices were higher after the report, suggesting that maybe a bottom was priced in! This was part of the thesis in yesterday’s FarmLead Breakfast Brief, as I wondered out loud if the July 2018 WASDE could stop the bleeding in grain markets. However, we’re seeing lower corn prices and soybean prices this morning, and canola prices are also trending lower.
Specifically for corn, the USDA’s July WASDE report showed the market that American farmers would produce 14.23 billion bushels of corn in 2018. This figure is 190 million bushels higher than June but still below last year’s crop and the five-year average. Most eyes were glued to demand numbers in the July WASDE, but the byproduct of this is ending stocks: US 2018/19 corn carryout will come in at 1.55 billion bushels. This would be a 23% decline from last year’s carryout of 2.03 Billion bushels!
Read up on our full analysis of the July WASDE report for corn prices here.
Bullish Canola, Bearish Soybeans in July WASDE?
For soybeans, the July WASDE report showed the market that American farmers would produce 4.31 billion bushels of soybeans in 2018. This figure is 30 million bushels higher than what the USDA reported in June 2018. Compared to the five-year average of 3.98 billion bushels, 2018/19 American soybean production is 8.2% higher.
The big surprise for American soybeans though was in the ending stocks number. Average trade expectations before the report were 471 million bushels still left in the pipeline as of the end of 2018/19. However, the USDA said there’ll be 580 million bushels available. This is up 51% from the June report and 25% more than where the 2017/18 carryout ended up!
Read up on what else we took out of the USDA’s July WASDE report for soybeans here.
For canola/rapeseed, US production was increased, but globally, production was felled by 2.63 million tonnes in this July WASDE report from last month’s. The decline of world rapeseed production was mostly attributed to production cuts in EU (down 9% year-over-year), Canada (down 2% year-over-year), and China (down 1.4% year-over-year). Comparably, India’s 2018/19 rapeseed production is expected to increase by 11% year-over-year.
Take a further dive into our insights and main conclusions for the canola/rapeseed market from the July WASDE here.
Cereals Earn Neutral-to-Bearish July WASDE
Conversely, spring wheat prices and winter wheat prices are trying to stick around in the green this morning.
For winter wheat prices, we’ve known for awhile that US and global production has been trending lower. Granted, the US winter wheat harvest this year of 1.12 billion bushels will be bigger than last year; it is 18% lower than the five-year average. Read up on our assessment of the July WASDE numbers for winter/low-protein wheat here.
For hard red spring wheat, US production is expected to jump nearly 52% year-over-year to 584 million bushels. For all colours of spring wheat, US production in 2018/19 was pegged at 614 million bushels, 15 million more than what the market was expecting and 48% higher year-over-year. Check out some of the other major numbers we looked at in the July WASDE for spring wheat here.
The US barley balance sheet also had some notable changes to it, especially around ending stocks, which more than doubled from the June report to this, the July WASDE report. This contradicted what was seen on the international stage as global ending stocks were lowered for both 2017/18 and 2018/19 crop years. Read up on our full analysis of the updated global numbers from the USDA for the barley complex here.
Overall, this WASDE report seemed to be fairly neutral across the grain markets. Yes, there is some changing trade winds, which the USDA accounted for a bit in this report, but the question I’m asking now is might we see even more changes in the next WASDE report, out on Friday, August 10.