May 9: May WASDE Report Preview

On Thursday, May 10, the USDA will release the May WASDE Report.

The global supply and demand report is a major influencer in international grain prices. Given ongoing changes in global trade policy, weather volatility, and other key factors, we’re anticipating an interesting day at the Chicago Board of Trade tomorrow.

Before the May 2018 WASDE drops at 12 p.m. EST tomorrow, let’s dig into market expectations.

Eyes on Global Wheat Production in WASDE Report

Tomorrow’s WASDE report will provide the first expectations for production in the 2018/19 year.

We’ll also receive updates on carryout in the U.S. and around the globe for both the old and new marketing year.

We’ll want to keep a close eye on just how much drought conditions around the globe will affect analysts’ expectations.

So, let’s start with the United States.

Average trade expectations call for a 7.3% reduction in U.S. winter wheat production year-over-year.

The persistent dryness across the United States has played a significant role in the worst wheat crop quality in the past 16 years. The agency projects that winter wheat production will come in around 637 million bushels for the new marketing year.

That’s a 15% drop from the 750 million bushels produced in 2017/18.

The agency is expected, however, to increase Soft Red Winter (SRW) and White Winter wheat production expectations for the 2018/19 year. Trade estimates call for 309 million bushels of SRW production, a 5.8% jump from 2017/18.

White winter wheat output is expected to increase by 1.3% to 230 million bushels from 2017/18 to 2018/19.

The table below provides a glimpse of all U.S. crop production with a breakdown across all wheat categories.


There are two other important wheat numbers that we are eyeing on the international front.

The first, of course, is global carryout. Total wheat carryout is expected to come in at 271.13 MMT for 2017/18.

That figure is about a 90,000 MT decline from last month, as the table below shows.

Tomorrow will also present the first estimate on global stocks for the new crop year.

Trade expectations range between 260 MMT and 278.7 MMT. That average estimate is 269.18 MMT for 2018/19, which would be a small decline from the previous year.

We anticipate that global wheat production will decline, fueled by dryness across the United States, the Black Sea, and Australia. This morning, we saw that Bloomberg’s survey revealed forecasts for about a 9.6 MMT decline year-over-year in production.

Average analyst projections called for 750.2 MMT in 2018/19, down from 759.8 MMT in 2017/18.

But the real number to watch is out of Russia. Just how much is the country poised to ship?

This year, the nation’s exports are up 42% compared to the same time as last year.

Though the markets anticipate that Russia will produce a smaller crop this year, analysts are expecting just a small drop in its exports in the year ahead.

How Far Will Corn Stocks Fall?

Tomorrow, many analysts might be tempted to immediately turn to South American corn production. Ongoing dryness has taken a bite out of Brazilian and Argentinean crops this year.

But we’ll be turning first to the global stocks figure… with a close eye on U.S. stocks.

Of course, before we preview this number, it’s important to remember that this report was compiled about two weeks ago before rumors emerged that the Trump administration was moving to alter the Renewable Fuel Standard in a way that would likely heighten domestic demand.

With that said, analysts are expecting that global corn stocks for May 2017/18 to fall from 197.78 MMT in April to 195.18 MMT.

For 2018/19, analysts expect that global carryout will slide further. The average estimate comes in at 182.75 MMT.

But we’ve seen aggressive estimates in as low as 148.73 MMT.

The combination of weather uncertainty, increased ethanol output and consumption, and China’s ongoing clearance of inventory has made some people very bullish.

In the U.S., analysts expect that ending stocks will dip from 2.182 billion bushels (55.4 MMT) to 2.176 billion bushels (55.2 MMT) in May.

For 2018/19, that U.S. number is even more aggressive at just 1.631 billion bushels (41.4 MMT).

A decline in stocks is also complemented by an expected dip in global production.

That is apparent in South America. Analysts project that the USDA will slash Argentina’s corn production by another 700,000 MT to 32.3 MMT.

In Brazil, analysts project that production for 2017/18 will decline from 92 MMT to around 88.8 MMT.

The table below provides a breakdown of expected changes to production in South America on Thursday.

Changes in Soybean Output Expected

The most volatility in the markets will likely come in the soybean complex on Thursday.

Given the ongoing trade spat between the United States and China, markets are expecting other markets to pounce on the opportunity. That means an uptick in soybean production to complement expected gains in global demand.

Analysts expect that global production will pop by about 3% for 2018/19. We’ve seen global production estimates around 345.5 MMT, about a 10.5 MMT bump from the previous crop year. But it wouldn’t surprise anyone if we somehow saw figures approach the record 351 MMT in 2016/17.

Of course, the big questions center around U.S. global stocks. With an uptick in production, analysts expect that China and other global markets are not going to demand as many soybeans as those that will be planted.

Yes, analysts expect that 2017/18 carryout will decline from 90.8 MMT in April to 89.9 MMT.

But don’t expect that optimism to last too long.

Trade expectations peg global stocks at 90.52 MMT for the 2018/19 year.

In the United States, soybean carryout is pegged at 546 million bushels, a 4-million-bushel decline from April’s estimate. For 2018/19, the first estimate of the U.S. soybean carryout is pegged at 533 million bushels. The table below provides a glimpse of U.S. carryout estimates for 2017/18 and 2018/19 across all crop categories.

Elsewhere, keep an eye on South America. Analysts expect that a boost to Brazil’s soybean output will offset any cuts in Argentina’s output for 2017/18.

Analysts project that Argentina’s output will fall from 40 MMT in April to about 38.7 MMT in May.

The Brazilian figure, however, is expected to jump from 115 MMT to 116.2 MMT.

AgRural is even more bullish, with a production estimate north of 119 MMT.

It remains to be seen how USDA’s supply and demand sheet will be looking like on May 10.

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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