Today’s July WASDE report showed few surprises for soybeans, but eroded recent price gains in the corn and wheat complex. While new crop ending corn stocks tightened on a smaller crop thanks to 5 million fewer acres planted this spring, old crop stocks rose on reduced ethanol demand.
"Most major price adjustments had already been factored in after last Tuesday’s acreage report," said Farm Futures market analyst Jacquie Holland. "Despite hot and dry weather recently that has seen early corn yield projections falling, USDA remained largely unchanged on their 2020/21 production estimates for corn and soybeans."
For corn, USDA noted “sharply lower supplies,” and also lower feed and residual use with higher food, seed and industrial use. Feed and residual use fell 200 million bushels, while food, seed and industrial use bumped up 25 million bushels. The net result was lower ending stocks, at 2.648 billion bushels.
As expected, USDA also significantly trimmed its 2020 corn production forecast by 995 million bushels, for a total production now at 15 billion bushels, which analysts largely expected after digesting the agency’s June 30 acreage report. Yield expectations were unchanged, however, at an average 178.5 bushels per acre.
Also worth noting – USDA raised its season-average price estimates by 15 cents to $3.35 per bushel based on recent inroads that futures have made in the past month.
"Ethanol demand continued to take a hit, with 2019/20 demand falling 50 million bushels to 4.85 billion bushels," Holland said. "USDA also lowered feed forecasts for both the new and old crop years, shaving 100 million bushels from 2019/20 and 200 million bushels from 2020/21 as reduced meat processing capacities due to the pandemic slow the production pipeline."
World ending stocks for 2019/20 declined slightly, to 12.281 billion bushels. Analysts were expecting a modest increase from USDA’s June tally of 12.319 billion bushels, in contrast. World ending stocks for 2020/21 also fell below analyst expectations, to 12.403 billion bushels.
The U.S. soybean footprint is now estimated 200,000 acres larger, with USDA bumping up the total to 83.0 million acres this year. Export projections didn’t change, but supplies moved up 45 million bushels and crush estimates also went up 15 million bushels, for a net gain of 30 million bushels that left 2020/21 ending stocks at 425 million bushels.
"Domestic soybean demand has continued to rise through the pandemic," Holland said. "2019/20 crush demand ticked up another 15 million bushels to 2.155 billion bushels. The trend is expected to continue into 2020/21, as USDA increased new crop crush usage estimates up 15 million bushels as well to 2.16 billion bushels. 2020/21 will see the highest soybean usage rate in history on those adjustments."
USDA boosted soybean’s season-average price higher after futures prices have rose steadily this past month, now reaching $8.50 per bushel.
World ending stocks for 2019/20 soybeans rose slightly to 3.662 billion bushels, while 2020/21 world ending stocks shrank down to 3.493 billion bushels. Analysts were expecting increases for both data points. Production estimates for Brazil increased to 4.629 billion bushels, while Argentina’s production potential held steady, at 1.837 billion bushels.
For wheat, USDA noted “larger supplies, lower domestic use, unchanged exports and increased stocks.” As a result, 2020/21 ending stocks rose 17 million bushels higher to 942 million bushels. Analysts were expecting a slightly larger total, with an average trade guess of 948 million bushels. The season-average farm price held steady, at $4.60 per bushel.
World ending stocks for 2019/20 wheat moved slightly higher, to 10.916 billion bushels, which was slightly below the average trade guess of 10.923 billion bushels. World ending stocks for 2020/21 moved slightly lower, in contrast, to 11.567 billion bushels.
Here’s a quick rundown of some major wheat competitors overseas:
- Argentina: 725.6 million bushels (down slightly from June estimates)
- Australia: 558.4 million bushels (unchanged from June)
- Canada: 1.189 billion bushels (unchanged from June)
- Russia: 2.898 billion bushels (unchanged from June)
Production estimates are also down in the European Union, primarily due to reductions in France and Spain – putting the continent on pace for the lowest production since 2012/13.
"USDA lowered production forecasts for the European Union, Russia, and the U.S. – the three largest wheat producers in the world," Holland said. "This led to 2020/21 ending stocks tightening by nearly 46 million bushels. But even despite the lowered global yield estimates, ending global stocks remain at a record high as the world continues to be awash in wheat."