June 12: Instant Reaction to the June WASDE Report

On Tuesday, the USDA reported the June WASDE report.

Thirty minutes before the report, let’s take a look at where grain prices sat.

At 11:30 EST:

July corn prices added 5 cents and were a tick above $3.72 per bushel. The September corn price added 5 cents to sit a tick above $3.81.

July soybean prices were up 1 cent to sit just under $9.55 per bushel. The August contract added 1.25 cents to sit a tick above $$9.60.

On the wheat front, July SRW contracts added 2.5 cents to sit at $5.17. The September contract added 2.25 cents to hit $5.33 per bushel.

In Kansas City, the July HRW contract added 0.5 cents to sit a tick above $5.32. The September HRW contract was unchanged at $5.55.

Today, we’re keeping a close eye on a few key figures in this month’s report.

Where do you turn for expertise?

Ahead of the report, we’re not expecting any changes to U.S. production of corn and soybeans. However, we could see a few slight changes to U.S. wheat production based on the ongoing quality concerns in the Southwest.

We’re expecting that corn stocks will dip slightly this month, but the real question is what is happening on the soybean front. There has been a lot of chatter about Chinese demand, and fear that their livestock industry isn’t going to require as many beans as first thought.

Okay… let’s dig into this month’s report. Here’s a breakdown of the main numbers to watch:

WASDE June report numbers

Overall reaction?

Soybean Prices Gain on Big Stocks Cut

The headline today is that US Soybean stocks fell by a sharp amount for both old crop and new crop. The agency pegged 2017/18 stocks at 505 million bushels, a 25-million bushel decline from the May report.

Meanwhile, the 2018/19 end stocks figure was cut by 30 million bushels to 385  million. The combined 55 million bushels in cuts helped push soybean prices higher in the first minutes of trading after the release. Analysts had expected inventory levels to rise to 417 million bushels.

Naturally, this news helped support soybean prices.

At 12:05 p.m., July soybean prices were up 5.75 cents to reach $9.595.

The agency did not many any change to 2018/19 production, yield, or export figures.

That latter decision was key as some analysts had speculated that ongoing trade disputes and changes in Chinese demand could affect U.S. export forecasts.

Markets largely ignored the news that global ending stocks increased from 86.70 MMT to 87.02 MMT month-over-month. The former figure is lower than trade estimates of 86.74 MMT.

In South America, Brazil’s soybean production increased by 2 MMT to 119 MMT (4.4 billion bushels). Argentina’s soybean production saw a cut of 2 MMT to 37 MMT (1.4 billion bushels).

Corn Gains on Cuts to Inventory Levels

The June 2018 WASDE report did not deliver any changes to production, yield, or export numbers. But we did see two large cuts to ending stocks across the old crop and new crop spectrum.

Old crop (2017/18) end stocks came in at 2.101 billion bushels. This figure represented an 80 million bushel decline from the previous month. This was about 64 million fewer bushels than analysts had expected.

Meanwhile, the USDA cut its end stocks projection for new crop corn by 105 million bushels. The 2018/19 end stocks number is now 1.577 million. This is well below the 1.663 million average expected by analysts.

Were we missing anything critical?

In South America, Brazil’s corn production dipped 2 MMT to 85 MMT (3.3 billion bushels). Argentina’s corn production was unchanged at 33 MMT (1.3 billion bushels).

All Wheat Production Rises

The USDA said that global wheat stocks increased by a 1.83 MMT from the previous month. The 266.16 MMT reported in the June WASDE was 3.16 MMT higher than trade estimates.

The agency said that U.S. production increased marginally… from 1.821 billion bushels to 1.827 billion bushels., Hardly news that is going to drive significant movement in the market. In addition, the agency raised 2017/18 ending stocks from 1.070 billion bushels to 1.080 billion bushels.

New crop ending stocks, however, dipped by about the same level. The agency pegged U.S. ending stocks for the 2018/19 calendar at 946 million bushels, down from 955 million last month.

Digging into wheat categories, the agency said that winter wheat production was up from 1.192 billion bushels to 1.198 billion bushels.

On the spring wheat front, production increased from 315 million bushels to 316 million bushels. Again. it’s nothing to write home about on a Tuesday.

At 1: oo p.m., July wheat prices in Chicago added 18.75 cents to hit $5.3325. The September contract added 18 cents to sit just under $5.49 per bushel.

The HRW contract for July added 15.75 cents to hit $5.505. The September contract added 15.75 cents to fall just short of $5.97.

 

 

 

About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.

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