The USDA will release its July Supply and Demand report tomorrow, July 12. With corn and soybean markets on a roller coaster ride since early June, what the government publishes will be closely scrutinized. That is, before the market goes back to trading forecasted/actual weather.

On June 30, the USDA shocked the market by printing a corn acreage figure which exceeded the average trade estimate by 2.2 million acres (read: potentially more corn). The soybean number was 4.2 million BELOW the trade average (read: potentially very tight bean supplies).

Needless to say, the market‘s response to the report that day was rather dramatic with Dec Corn falling 33 ¾ cents, while Nov Bean futures rocketed 77 ½ higher! So, tomorrow’s response could be interesting and, potentially volatile as well.

Trade expectations

The Bloomberg wire service released its survey of trade estimates for tomorrow earlier this week. Some of the key points included:

Corn

What the USDA does with yield will obviously be very critical to tomorrow’s corn balance sheet. The market consensus is that the very dry June start to crop development in much of the Corn Belt has trimmed the top end of the yield potential. So, last month’s 181.5 bpa yield forecast may be on the high side. On the other hand, the last time the USDA reduced its yield forecast between the June and July reports was back in 2012 and, to the tune of 20 bpa. Corn ratings have improved the past couple of weeks thanks to cool temperatures and some very welcome rains in critical growing areas. We think a 176 bpa estimate is reasonable at this point. But does the USDA?

If the USDA does nothing versus trade expectations, there is the potential to add 400 mbu (+/-) to ending stocks, pushing the total past the 2.5 bbu mark. Keep in mind Brazil is in the middle of harvesting a record corn crop and one of the world’s largest buyers, China, is booking corn from there. So, even though there will be less corn shipped from Ukraine this year (smaller crop, less beginning inventory), U.S. export prospects may struggle the first half of the year as China secures some of its needs from Brazil.

The risk to prices would seem to be to the downside—the USDA does not cut yield as much as the trade expects AND with old/new crop unshipped corn sales at a 20-year low, there is the possibility of a slight reduction in the export forecast.

Soybeans

This is the commodity that looks especially interesting. The market has had 10 days to react to the June Acreage report and, as of this writing, this morning Nov Beans are up another 11 cents nearing $13.57 as traders attempt to balance acres and yield prospects heading into the critical August time period. June’s much smaller acreage estimate effectively took 208 mbu of soybeans out of the supply chain (assuming a 52.0 bpa yield). And, with the trade of the opinion yield is probably 7/10’s less, then another 58 mbu has been removed.

The USDA’s June ending stocks forecast for 2023-24 was a comfortable 350 mbu; with no change in demand, then 350 less 208 less 58 equals a theoretical ending stocks figure of 84 million. An impossible number? Keep in mind the 2013/14 crop year concluded with ending stocks of 92 million but with a 33%/585 mbu increase in domestic crush alone since that time, 125-150 million is likely the pipeline minimum in today’s environment.

What demand cuts could the USDA make in order to get ending stocks down to the 200 mbu level? Crush seems unlikely for several reasons:

Price Risk: A 150 mbu reduction in the soybean export forecast seems inevitable, although we wonder if forces aren’t already in play to achieve that with the market retaining its focus on weather, perhaps more so for soybeans than for corn.

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