USDA’s August WASDE Report: Big Crops but Big Demand

USDA’s August WASDE Report: Big Crops but Big Demand

Kevin McNew

Aug 17, 2020

The USDA released updated forecasts for the 2020 crop year in its WASDE report on Wednesday, August 12. Here are our primary takeaways for corn, soybeans and wheat:

Corn

USDA’s corn production figures came in higher than expected on a 181.8 yield, but higher demand helped soften the blow keeping new-crop carryout on par with expectations.

  • Last week’s derecho wind event, which was not accounted for in USDA’s August 1 survey, likely puts future yield and production figures lower. 

  • Old-crop carryout was lower thanks to a 20 MBU improvement in exports. This may get reversed later with ethanol production lagging.

  • With stocks at 18 percent of use (for USDA) or 20 percent for FBN’s own estimates, we look for prices to start moving higher. With a weakening dollar and strong export program, futures are about 20 cents too cheap, in our opinion.

Soybeans

How quickly the carryout picture looks more troubling thanks to a huge yield at 53.3 bushels per acre. This put an extra 185 MBU on the carryout to new-crop 2020. 

  • The good news in USDA’s report was a strong demand side from global users. China, EU and other Asian markets saw higher usage and exports for 2019, helping keep NC world stocks steady even with the big jump in U.S. inventories.

  • China’s imports, meanwhile, were lifted 3 MMT for 2020/21 to 99 MMT, showcasing a continued recovery in its pig herd.

  • Chinese buying of U.S. beans should continue through the end of the calendar year. This could get us back to $9, but getting much elevation above that will require weather issues in South America.

Wheat

USDA surprised the market with a cut to wheat stocks on higher exports. The cut did not significantly alter our price outlook.

  • Some good news is that the U.S. now is projected to be the second largest wheat exporter for 2020, second only to Russia. 

  • U.S. wheat sales have been strong, and commitments to date are running ahead of historical norms.

  • But, it will be hard to squeeze a much larger export program with Russia’s larger crop and Australia having a rebound in production.

  • FBN does not anticipate a lot of downside in futures from these levels, but it also is hard to get excited about these markets.

  • HRS stocks were raised with bullish news hard to find for Minnesota.

FBN's take on what it means for the farmer

Fresh USDA data did little to disrupt the market’s calculus on prices. Going forward, we do not expect much downside risk, especially with robust Chinese buying and ambiguity around last week’s derecho wind event. The excitement for the wheat market is mostly over from a pricing perspective for now.  

Want access to more insights like this?

This article is excerpted from our Market Intelligence newsletter, delivered weekly toFBN Market Advisory members. With FBN Market Advisory, you'll receive truly personalized tools and reports to support your grain marketing efforts. Get access to market news, straightforward marketing recommendations, basis trend insights and weather reports—all relevant to your operation and geographic location.

Copyright © 2020 FBN BR LLC. All rights Reserved. FBN Market Intelligence is distributed by FBN BR LLC. Contact877-472-4607for more information. For the purposes of quality assurance and compliance, phone calls to and from FBN BR LLC may be recorded.

We do not guarantee customers will receive specific benefits or value from participating in FBN BR LLC; results will vary. The data in this article is being supplied as a courtesy by FBN BR LLC. The risk of trading futures and options can be substantial and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. FBN BR LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This article contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by FBN BR LLC. Past performance is not necessarily indicative of future results.

Disclaimer: Futures and Option trading involves substantial risk, and may not be suitable for everyone. Trading should only be done with true risk capital. Past performance, either actual or hypothetical, is not necessarily indicative of future results.

Kevin McNew

Aug 17, 2020