Nov 8 – Re-Evaluating November WASDE Expectations

Grain markets are mostly in the red this morning as the complex prepares for the November WASDE, released later today at 11AM CST.

“Those who cannot remember the past are condemned to repeat it.” – George Santayana (Spanish-American philosopher)

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Re-Evaluating November WASDE Expectations

Grain markets are mostly in the red this morning as the complex prepares for the November WASDE, released later today at 11AM CST. Despite the bullish nature of the significant delay in Harvest 2019, going into the November WASDE, the complex is leaning a bit bearish for corn prices, but is a more optimistic for soybeans. [1] I’ll be watching today’s November WASDE from the Agri-Trade show in Red Deer, AB, so you’re in town, stop by the FarmLead booth on the Centrium concourse and let’s chat!

November WASDE Pre-Report Expectations

Heading into today’s November WASDE report, grain markets are expecting a drop in soybean and corn yields and production, but nothing that’s going to get the bulls going. I would be shocked if we saw a reduction in the harvested acres in this November WASDE, as it’s a safer play for the USDA to maintain (read: explain) the status quo than create more questions with a new number. Here’s a breakdown of pre-report estimates for today’s November WASDE for the major areas that grain markets are watching.

2019 November WASDE pre-report estimates

There’s a lot of push-back from the bears on weak demand and it’s hard to disagree! For example, currently, the U.S. has exported less than 4 MMT of corn through week 9, down 57% year-over-year. Comparably, the USDA is currently forecasting 48.26 MMT of U.S. corn exports in 2019/20, which would be an 8% drop year-over-year. Keep in mind that the USDA did decrease their estimate of American corn exports by nearly 5 MMT from the September WASDE to October WASDE report. Seeing them downgrade exports again in the November WASDE would be a win for the bears.

U.S. weekly corn exports through Week 9 of the 2019/20 crop year

Do November WASDE Corn Yields Count?

Where the bulls might gain some ground back through is in corn yields. I timestamped back on June 7th that, due to Prevent Plant and the delayed state of Plant 2019, average American corn yields would come in somewhere between 163 and 168 bushels per acre by the January 2020 WASDE report. Now, you could certainly call me out and say that this was a “safe” range to throw out there, but, at the time, the USDA was estimating average national corn yields of 176 bushels per acre. A few days later, in the June WASDE report, the USDA dropped their estimate of average corn yields by 10 to 166 bushels per acre.

Since then, we saw the same number in the July WASDE report before the USDA increased seeded acres to 101.2M and corn yields to 169.5 in the August WASDE report. Thereafter, they said Harvest 2019 for American corn farmers would produce an average yield of 168.2 bpa in the September, and then bumped it up again to 168.4 bpa in the October WASDE.

So, does the 167.3 pre-report estimate for today’s November WASDE make sense? Unfortunately, I think that this is not the right question to be asking. Grain markets have constantly debated what corn yields and production will be over this growing season but we’re past speculation. At this point, the yield is either there, or it’s not! Further, there’s still tens of millions of acres of unharvested corn – what happens to corn yields on those acres (it should go down, no?) and will the USDA even account for these asterisks in the November WASDE report?

My guess is they won’t, similar to how they didn’t account for some significant acreage anomalies in the July and August WASDE reports. Also keep in mind that basically 2/3s of the U.S. corn crop was planted after May 15th, the usual cut-off date for optimal yield potential. This included more than 1/3 of the crop that was planted after June 1st. Thus, if a significant amount of corn was planted after optimal yield dates, and now most of those crops are still standing in snowy or wet conditions, how can the USDA justify corn yields that are less than 10 bushels below last year’s corn yield of 176.4 bpa (which was second place to only 2017/18’s record of 176.6 bpa)?

Here’s the tough talk: they probably won’t move the needle on corn yields that much and they won’t account for massive amounts of unharvested corn acres until the January. Also, worth mentioning is that in 5 of the last 6 years, the final WASDE report in January has a corn production number that’s 118M bushels, on average, lower than the number in the November WASDE. Therein, while I hope I’m wrong, this means that the bullish push that you’re looking for on corn prices today isn’t likely to happen.

Show Respect Where Respect Is Due

Going outside of the grain markets to end this week, I’m a big believer in giving credit where credit is due. If you’re a FarmLead Breakfast Brief reader, you’ve certainly seen clickable numbers at the end of the some sentences that open up to articles that relate to that sentence’s subject matter. I do this because I think that there is further reading for you, if you want dive deeper into said subject matter.

That said, this coming Monday is November 11, which is Remembrance Day in Canada and Veterans Day in the United States. Since World War 1, roughly 113,000 Canadians have died in military combat, and while that might not seem like a lot now, the majority came in the 1914-1918 and 1939-1945 periods. [2] These numbers, at the time, represented about 1-2% of Canada’s total population. A 2% sacrifice so the other 98% (and their subsequent lineage) could enjoy freedom. Not to be forgotten about, nearly 230,000 other Canadians were wounded in military combat since World War I.

Comparably, in the United States, nearly 600,000 men and women have given their lives since World War I to the pursuit of freedom against the tyranny of evil. [3] Almost another 1.2 million people were wounded in this same quest. The bottom line here is that we are incredibly indebted to these individuals. That said, while we should never forget those from decades ago, I believe that those veterans who have recently returned home from military conflicts need to be better supported and recognized.

Accordingly, there will be no FarmLead Breakfast Brief on Monday, November 11th. Instead, I will be at the Tomb of the Unknown Solider in Ottawa, paying my respects to those who have fallen, but also standing up for those no longer can. Today’s Breakfast Brief quote is a reminder that the worst of society can and will emerge without accountability, but also if our collective memory lapses. Many great leaders like Winston Churchill, General Patton, and Edmond Burke have also issued similar quotes. Why? I would posit that your freedom and your children’s freedom and your children’s children’s freedom depends on it and constantly reminding ourselves that things can get very bad, if we don’t consistently reflect on the worst of times.

In lieu of my usual sign-off to the FarmLead Breakfast Brief, join me instead in the following:

Lest we forget the fallen, nor stop honouring the returned brave.

Have a good weekend.

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

At 7:55 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.32 
CAD, $1 CAD = $0.7576 USD)

Dec Corn: -1¢ (-0.25%) to $3.743 USD or $4.94 CAD
Jan Soybeans: -1.3¢ (-0.15%) to $9.353 USD or $12.346 CAD
Dec Soybean Meal (per short ton): -$0.90 (-0.3%) to $304.60 USD or $402.09 CAD
Dec Soybean Oil (cents per lbs): +0.12¢ (+0.4%) to 31.55¢ USD or 41.65¢ CAD  
Dec Oats: -2.8¢ (-0.9%) to $3.025 USD or $3.993 CAD
Dec Wheat (Chicago): -2.5¢ (-0.5%) to $5.10 USD or $6.732 CAD
Dec Wheat (Kansas City): -1.5¢ (-0.35%) at $4.233 USD or $5.587 CAD 

Dec Wheat (Minneapolis): -1.8¢ (-0.35%) to $5.17 USD or $6.825 CAD
Jan Canola: +2.3¢ (+0.2%) to $10.483/bu / $462.20/MT CAD or $7.941/bu / $350.14/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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