Nov 9 – WASDE Report, China Surprises (a Bit)

Good Morning!

Grain markets this morning are in the red as the complex reacts to a November WASDE report released yesterday that provided some surprises for U.S. yields and global ending stocks.

“The art of life lies in a constant readjustment to our surroundings.”

– Kakuzō Okakura (Japanese Scholar)

 

Test your grain today!

 

WASDE Report, China Surprises (a Bit)

Grain markets this morning are in the red as the complex reacts to a November WASDE report released yesterday that provided some surprises for U.S. yields and global ending stocks.

Updates from China’s National Bureau of Statistics (NBS) were incorporated into this month’s WASDE report. If not for China, this might be considered a bit of a bullish report!

Let’s dig into this month’s WASDE report. [1]

Soybean Markets Only Thinking About China

In the November WASDE report, the USDA lowered average soybean yields to 52.1 BPA. This is a full bushel lower than the October WASDE report’s number, and also below the average pre-report guesstimate of 53 BPA. Thus, total 2018/19 U.S. soybean harvest falls to 4.6 billion bushels, 90 million bushels lower than the forecast in last month’s WASDE report.

On the exports front, U.S. shipments were lowered by 160 million bushels to 1.9 billion, down about 11% year-over-year. However, Through Week 9 of the 2018/19 U.S. soybean marketing year, exports are tracking more than 41% lower year-over-year to just 8.62 MMT. Shipments to China are down 96% with only 15 million bushels shipped there so far, versus the nearly 380 million bushels at this time a year ago.

With the lower exports, U.S. soybean ending stocks are expected to climb to 955 million bushels for the 2018/19 crop year. Globally, 2018/19 ending stocks were raised to 112.08 MMT, up more than 2 MMT. However, this is mainly the result of 2017/18 carryout being raised by 3 MMT.

What surprised me was that the USDA did not raise exports for Brazil for 2017/18, keeping the number at 76.2 MMT. However, Brazil soybean exports for 2018/19 was raised by 2 MMT to 77 MMT.

WASDE Report Shows Huge Corn Stocks!

Conversely, US corn exports program has been steady though! Through Week 9 of the 2018/19 crop year, actual exports of U.S. corn are tracking 85% higher than the same time in 2017/18 with over 417 million bushels now shipped out.

As mentioned in our November WASDE recap on FarmLead Insights, the USDA surprised the market by lowering 2018/19 U.S. corn exports by 25 million bushels month-over-month to 2.45 billion bushels.

Thinking more globally, China’s NBS re-evaluated all things agriculture over the period 2007/08 to 2017/18. Throughout this decade-long timeframe, China increased total corn production by a ridiculous 266 MMT (or 26.6 MMT more corn output per year). As a result, 149 MMT, all attributed to China, was added to the 2018/19 global ending stocks number corn.

Since China isn’t necessarily a large importer OR exporter of corn, this increase is considered to be a moot point and won’t have much of an impact of corn prices.

Wheat Market Tightening?

If we don’t count China, total 2018/19 world wheat production was lowered by 1.9 MMT in the November WASDE report. The majority of the revision was attributed to Australia’s wheat crop being lowered by 1 MMT down to 17.5 MMT. As a reminder, last week, ABARES said that this year’s wheat crop in the Land Down Undaa would be just 16.53 MMT.

This is still quite a small crop, and that means fewer exports. Specifically, in this WASDE report, the USDA lowered Australian wheat exports by 1.5 MMT from last month to 11.5 MMT. This would be lowest since the 2007/08 crop year.

The USDA kept Canadian wheat exports at 24 MMT, although currently, non-durum wheat exports out of the Great White North are tracking 23% higher year-over-year through Week 14 of the 2018/19 crop year.

2018/19 Week 13 Weekly Canadian Wheat Exports

Overall, the market is pricing in the larger ending stocks today as the headline that continues to be the biggest takeaway is there’s still a lot of grain in the world.

For our GrainCents readers, we’ll be digging into all the major changes to the production and exports numbers in this weekend’s Digest. To start receiving this in-depth weekly briefs on the global happenings on specific crops, please register here!

To growth,

Brennan Turner

CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

 

At 7:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3189 
CAD, $1 CAD = $0.7582 USD)

Dec Corn: -2.5¢ (-0.67%) to $3.710 USD or $4.893 CAD
Jan Soybeans: -2.8¢ (-0.32%) to $8.763 USD or $11.558 CAD
Dec Soybean Meal (per short ton): $0.20 (0.07%) to $306.30 USD or $403.99 CAD

Dec Soybean Oil (cents per lbs): -0.18¢ (-0.64%) at 27.84¢ USD or 36.72¢ CAD  
Dec Oats: unchanged to $2.868 USD or $3.83 CAD
Dec Wheat (Chicago): -6.0¢ (-1.18%) to $5.018 USD or $6.618 CAD
Dec Wheat (Kansas City): -6.5¢ (-1.31%) to $4.908 USD or $6.473 CAD

Dec Wheat (Minneapolis): -2.3¢ (-0.40%) to $5.778 USD or $7.621 CAD
Jan Canola: -$1.60 (-0.27%) to $10.898/bu / $480.50/MT CAD or $8.262/bu / $364.31/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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