The USDA came out on Wednesday with its September WASDE report, which turned out to be one of the most bearish WASDE reports in recent memory, especially for corn and soybeans.
“The next time you experience a blackout, take some solace by looking at the sky. You will not recognize it.” – Nassim Nicholas Taleb (Lebanese-American economist)
September WASDE Makes Grain Markets Black Out
The USDA came out on Wednesday, September 12th with one of the most bearish WASDE reports in recent memory, destroying any pre-report expectations, especially for corn and soybeans.
Grain markets this morning are in the green though for the first time in 2 days as we start to see the correction from the sell-off the past two days. If you didn’t catch Garrett’s instant reactions to the WASDE report on Wednesday afternoon, let’s break down some of the numbers.
September WASDE Records
Going into the September WASDE report, the market was already quite bearish on soybeans, expecting to see 2018/19 ending stocks in the US top 800 million bushels and 100 MMT globally.
However, the numbers turned out to be even more bearish than analysts expected. Now only did U.S. soybean stocks hit an astounding 845 million bushels, but global stocks popped another 2.7 million metric tonnes (MMT) to touch just north of 108 MMT.
For the domestic number, this is thanks to American farmers producing a record yield of 52.8 bushels per acre, up 1.2 from last month’s report and about 0.5 higher than what the market was expecting. This adds up to a record U.S. soybean crop of 4.693 billion bushels (or 127.73 MMT).
On the corn front, the USDA was even more bearish.
Going into the report, the average pre-report guesstimate for US corn production was 14.27 billion bushels off an average yield of 177.7 bushels per acre. However, the USDA is now suggesting that average American corn yields for the 2018/19 crop will be 181.3 bushels per acre.
That’s a new record, beating the previous mark – set last year, no less – by nearly 5 bushels per acre!
This means 2018/19 corn production should be the second-largest on record at 14.83 billion bushels. That’s also 560 million bushels more than what the market was expecting to see.
Worldwide corn carryout was estimated by the USDA at 157.3 MMT, which is a healthy decline of 19% year-over-year, but the entire decline is basically being attributed to China working through their massive stockpiles. 2018/19 ending stocks for soybeans were raised to a record 108 MMT, up 14% year-over-year.
USDA Bullish Flax, Canola Ignored
The USDA left the Canadian canola production number unchanged from August’s estimate at 21.1 MMT. Compare this against StatsCan’s August estimate of 19.2 MMT of canola production. Next Wednesday, on September 19th, we’ll hear from StatsCan again for their satellite-based crop production estimates.
U.S. canola production was pegged by the USDA at 67 million bushels (or 1.52 MMT if you’re converting bushels to metric tonnes at GrainUnitConverter.com). More globally though, the USDA revised total rapeseed production lower, include declines in Europe and China. Strong domestic crush and exports should continue to help Canadian canola prices, but we must keep in mind that canola is very expensive to soybeans right now.
U.S. flax production wasn’t actually estimated by the USDA, but we do know that they think harvested acres will be just 160,000. This is down 41% year-over-year and 49% below the 5-year average. For our GrainCents flax readers though, we’ve been tracking crop conditions in the US for awhile and provided our own estimate of what the 2018/19 U.S. flax production number will be.
Bearish Wheat and Oats, Bullish Barley?
Getting into wheat, we saw a surprising upgrade to the Russian crop by 3 MMT, now estimated to be at 71 MMT. Keep in mind that this is still 14 MMT below last year’s record haul. The USDA downgraded both Canadian and Australian crops to 31.5 MMT and 20 MMT respectively. However, these numbers are both bigger than the 29 MMT of total wheat production estimated by StatsCan and the 19.1 MMT forecasted by ABARES.
To end the year, 2018/19 global wheat ending stocks were pegged by the USDA at 261.3 MMT. Going into the report, the market was expecting 257.2 MMT, and August’s number was 259 MMT.
In the U.S., 2018/19 hard red spring wheat ending stocks was lowered by 10 million bushels from the August estimate, despite production being stayed at 583 million bushels (or 15.9 MMT). Food for thought: US HRS wheat carryout has now being lowered by a combined 31 million bushels in the past two WASDE reports.
Global oats stocks came into focus for our GrainCents readers in this September WASDE, while the USDA kept its 2018/19 production number at 66 million bushels. We also saw the USDA lower 2018/19 global barley ending stocks to just under 18 MMT, but there are some interesting trade updates that we dug into for GrainCents readers.
Wrapping up the September WASDE
Rounding out the September WASDE, we now know the USDA expects U.S. peas production to drop just 2.1% year-over-year, harvested U.S. lentils acreage will fall 26%, but the U.S. chickpea crop will likely more than double in 2018/19.
Also, U.S. durum ending stocks were raised by 5 million bushels to 36 million (the same as last 2 years!).
Despite the bearish nature of the USDA’s WASDE report this month, we’re seeing a lot of social media posts of the negative weather (read: snow) impacting Harvest 2018 in Western Canada. This obviously brings back the memories of the battle of Harvest 2016.
From a price direction, something to keep in mind here is that back in the 2016/17 crop year, grain prices didn’t rally as much as everyone was hoping, meaning we should keep our expectations in check.
Second, it became really important to get your grain tested and know your quality. We’ve built a simple tool called GrainTests.com to help you do just that.
Have a great weekend!
Due to travel, we are unable to list the futures prices this morning but you can find them here.
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