On Wednesday, the USDA released the September WASDE report, which offered a few key updates to the global corn crop, namely US corn yields.
The number one reason why corn prices immediately slumped was the surprising uptick in the estimate for corn yields . The USDA projects record corn yields of 181.3, which was well above trade estimates before the report.
But there was plenty more action and reason for bearish sentiment.
Here’s our breakdown of the numbers.
The USDA’s September WASDE report showed the market that American farmers will produce 14.83 billion bushels of corn in 2018. This figure is 241 million bushels higher than the USDA reported in August 2018.
Going into the report, the average guesstimate for US corn production was 14.27 billion bushels.
Compared to the five-year average of 14.3 billion bushels, 2018/19 American corn production will be nearly 4% higher.
The reason for the increase in production was mainly attributed to average US corn yields being re-adjusted to 181.3 bushels per acre (bpa). Compare this to the 178.4 bpa estimated in August, the pre-report average expectations from Reuters of 177.8, Bloomberg average guesstimates at 177.6, and the ProFarmer crop tour’s estimate of 177.3 bpa. Overall, this is a very bearish figure.
From a demand perspective, we can look to ending stocks to get an idea of where we sit.
The USDA estimated that U.S. 2018/19 ending stocks will be 1.77 billion bushels, a decrease of 12% year-over-year. That said, this figure was increased by 90 million bushels from the August WASDE report.
And for American corn, average trade expectations before the report were 1.64 billion bushels, so this estimate could be viewed as bearish.
From a global carryout perspective, 2017/18 corn stocks were revised by the USDA to 194.2 MMT. That figure is about 1.9 MMT higher than the average projection of 192.3 MMT held by analysts before the report. It’s also 900,000 MT higher than the August 2017/18 global corn stocks estimate of 193.3 MMT.
Thinking into the new crop, year, the agency says that 2018/19 global ending stocks will come in at 157.3 MMT. Compared to the 2017/18 number mentioned above, this is a bullish decline of 19.1% year-over-year. Unfortunately, it is a smaller decline than what analysts had expected.
Finally, U.S. export projections were hiked for new year crop. The USDA projects that U.S. corn exports will hit 60.96 MMT, a figure that was a 1.3 MMT increase from the previous estimate.
U.S. corn yields expectations dominated trading sentiment on Wednesday. Of course, there is a multitude of other factors that we have to consider, and ones that we will explore in greater depth in this weekend’s digest.
They include the lack of change to South American production and exports, increasing exports out of Ukraine and Russia, and what drove the uptick in old-crop ending stocks around the globe.
In addition, we’ll be looking at how improved weather in the EU has bolstered output expectations.