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:
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.
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.
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.
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.
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