The August WASDE report is upon us…
Ahead of the report, soybean prices and corn prices were in the red. Wheat prices found small gains in Chicago and Kansas City thanks to ongoing dryness and downgrades in crop quality and production in Europe.
Fifteen minutes before the WASDE report, let’s look at futures contracts in Chicago.
- Corn: September contracts were down 3.25 cents at $3.66.
- Soybeans: September contracts fell 10 cent cents to hit $8.83.
- Wheat: September SRW contracts added 3.5 cents at $5.68 per bushel.
What’s the general sentiment out there before the release of the report?
That’s fair. Maybe we shouldn’t be afraid…
Thanks for the Pep Talk.
Okay… let’s dig into the report… Here we go…
Nope… Let’s try again!!!
Instant Reactions to the August WASDE Report
Global Wheat Stocks Sink
The USDA reported that 2018/19 U.S. production of wheat would come in at 1.877 billion bushels. That figure was 4 million bushels lower than the July estimate. It was also higher than the average trade expectation of 1.85 billion bushels.
Stocks were also cut. The agency said that total stocks would come in at 935 million bushels for the U.S. This figure was a 50 million bushel decline from the July estimate.
On the global front, total wheat stocks were cut from 260.88 MMT to 258.96 MMT. That estimate was still higher than the average trade estimate of 256.42 MMT.
Moments after the WASDE report was released, SRW wheat prices for September slumped 9 cents to hit $5.555 per bushel. In Kansas City, HRW contracts for September fell 8.5 cents to hit $5.70.
In Minneapolis, MGEX September spring wheat contracts shed 10.5 cents to hit $6.1925.
Soybean Stocks Surge
The U.S. is awash in soybeans, and it’s clear that the trade spat between the United States and China is having a significant impact on the domestic stocks figure.
The USDA hiked 2018/19 ending stocks to 785 million bushels. That hike was 205 million more bushels than what was projected in July. The figure was well above the average estimate of 638 million bushels by analysts.
The agency did cut 2017/18 ending stocks from 465 million bushels to 430 million bushels. The USDA cited increased crush use as the reason for this decline.
The agency hiked U.S. soybean yields from 48.5 bpa to 51.6 bpa. Based on acreage expectations, that figure fueled an increase of 276 million more bushels in production. The USDA now expects that U.S. farmers will produce 4.586 billion bushels of soybeans. This figure is well ahead of the average of 4.407 billion bushels projected by analysts.
On the global front, the USDA projected a big jump in international soybean stocks for 2018/19. The agency projected ending stocks at 105.94 MMT. That figure was a 7.67 MMT increase from the July WASDE. It was also well ahead of the 99.33, which was the average projection among analysts.
The USDA did hike U.S. export projections from 55.52 MMT to 56.06 MMT. Lower prices are expected to drive higher demand from nations not named China.
The USDA did cut its demand estimate out of China from 113.6 MMT to 112.1 MMT. The agency also left 2018/19 production estimates untouched in Argentina and Brazil at 57 MMT and 120.5 MMT, respectively.
Moments after the release of the WASDE report, September soybean prices in Chicago fell 21 cents to hit $8.72 per bushel.
Corn Yields Surge to Record
The USDA pegged U.S. corn yields at a whopping 178.4 bushels per acre.
The new record was fueled by a 4.4-bushel increase from the July WASDE. The projection also pushed U.S. production estimates up by 356 million bushels to 14.586 million bushels. That production estimate topped the average estimate of 14.411 billion bushels.
The agency did not change 2017/18 ending stocks, keeping the figure at 2.027 billion bushels. However, the agency did hike U.S. corn stocks for 2018/19 from 1.552 billion bushels up to 1.684 billion bushels. Given that the figure was higher than the 1.636 billion bushels that were the average projection, we can take this report as bearish.
Finally, the USDA didn’t do us any more favors with the hike in global ending stocks for the 2018/19 calendar. The agency hiked its global stocks estimate from 1.5196 MMT to 155.49 MMT. The average trade estimate was just 152.59 MMT.
It’s worth noting that the USDA did hike export numbers for the United States. The agency says that the U.S. will ship 59.69 MMT after a month-0ver-month increase of 3.17 MMT.
The agency also cut production estimates for Brazil from 96 MMT to 94.5 MMT. The agency left Argentine production at 41 MMT.
After the release of the report, September corn prices in Chicago fell 5.75 cents to hit $3.635 per bushel.