Market News- POET: Portland  08/12/20 2:20:36 PM Printer Friendly VersionPrinter Friendly Version

Aug USDA Supply and Demand Report
Wednesday, August 12, 2020
  USDA Avg Est Range Est Prior Last Yr
2020/21 Yield          
     Corn 181.8 180.5 177.5 - 183.3 178.5 167.4
     Soybeans 53.3 51.2 49.8 - 53.0 49.8 47.4
2019/20 US Ending Stocks          
     Corn 2.228 2.271 2.198 - 2.325 2.248 2.221
     Soybeans .615 .617 .576 - .677 .620 .909
2020/21 U.S. Ending Stocks          
     Corn 2.756 2.800 2.622 - 3.061 2.648 2.248
     Soybeans .610 .524 .430 - .689 .425 .620
     Wheat .925 .946 .899 - 1.011 .942 1.044
South America Corn Production          
     Argentina 50.0 49.8 49.0 - 50.0 50.0 51.0
     Brazil 101.0 100.9 99.0 - 102.0 101.0 101.0
South America Soybean Prod          
     Argentina 49.7 49.9 49.0 - 50.0 50.0 55.3
     Brazil 126.0 125.4 122.0 - 127.0 126.0 119.0
2019/20 World Ending Stocks          
     Corn 311.3 312.6 310.0 - 314.3 312.0 320.1
     Soybeans 95.9 99.1 94.8 - 101.1 99.7 112.7
     Wheat 300.9 296.6 292.0 - 298.0 297.1 279.8
2020/21 World Ending Stocks          
     Corn 317.46 320.3 315.0 - 340.1 315.0 312.0
     Soybeans 95.4 97.6 93.7 - 103.0 95.1 99.7
     Wheat 316.8 313.8 309.1 - 319.4 314.8 297.1
  • Bearish U.S. numbers with USDA bumping yield estimates more than anticipated for both corn and soybeans.  These increases were patially offset with demand increases but new crop corn carryout still up 108 mln from last month.  New crop soybean carryout up 185 mln from last month.
  • On the world side, the numbers came in below estimates for both old and new crop carryout for both corn and beans.  Not sure yet where this difference came from.  Wheat did see a bigger than expected old/new crop carryout.
  • Leading into the report, we thought a lot of bearishness was already baked into the market and a bearish report may not see a bearish reaction.  I would have thought that the U.S. yield estimates would have been enough to trigger some downside movement but that has not been the case.
  • Corn has firmed from roughly 3 lower to now slightly firmer on the day.  Soybeans down a couple of cents initially before eventually closing up 9-12. 
  • When a bearish report is not bearish….will bulls step in to try and own corn/beans before the end of the day?  Possibly

  • The USDA will be out with their August WASDE report on Wednesday morning - with the average trade guess looking for corn yield to be up 1.9 bpa to 180.4 bpa, and beans up 1.5 bpa to 51.3 bpa.  As a reminder, the yield numbers in this report will be entirely based on farmer surveys as the USDA won't begin their field surveys until the September report.
  • The average trade guess has 19/20 corn carryout increasing by 17MM bushels from the July report, to 2.265B bushels (This is likely on expected cuts to ethanol crush as exports and feed/residual likely won't be "trued up" until the Sept 1 stocks report).  The average trade guess for 20/21 corn carryout is 2.8B bushels - up 152MM bushels from the July report.
  • The Central US weather forecast features mostly favorable conditions with better rain chances for the Midwest this week - specifically for the dry areas of western/Central IA.  Temps will also be near/below normal with no severe heat being seen.
  • Friday's CFTC report showed funds returning as sellers in the corn market, adding 29k shorts to their position…now short 172k contracts.  While the short positions is rebuilding, it is still 130k contracts shy of where they were in Mid-June.
  • The weekly corn chart is nearing a MACD bear cross…which has proven to be a lethal blow to bulls in the past.  The past 4 occurrences have produced an average of a 41 cents decline AFTER the cross…with a min move of 34 cents.  Something to keep an eye on and suggests the flush lower may not yet be complete.


New crop corn sales were very large coming in at the high end of expectations while old crop sales were very low.  Old crop only needs scattered sales the remainder of the month to be near the USDA’s projection assuming we see steady shipment pace thru August.  New crop sales totaled 2.6 mmt or 102.3 mln bushels including 76 mln bushels to China.  Total new crop sales are currently 270 mln above last year at this time and the highest in almost a quarter of a century.  China accounts for 225 mln bushels of new crop corn sales thus far on the books.

  • Both corn and beans are lower in early trade following StoneX's (Formerly FC Stone) yield estimates late yesterday afternoon.  Stone is predicting massive yields for both corn and beans - with corn pegged at 182.4 bpa and beans at 54.2 bpa - both records by a long shot.  The prior corn yield record was set back in 17/18 at 176.6 while the prior bean yield record was set in 16/17 at 52 bpa.
  • Using Stone's corn yield would boost corn production by 328MM bushels - pushing ending stocks to more than 3B bushels.  This of course assumes no demand changes - although I still think demand for both ethanol and feed next year is too high and would expect those numbers to work lower. 
  • The bean yield estimate from Stone probably provides the largest bearish variable.  Using Stone's bean yield estimate would add 365MM bushels to the soybean carryout…which would nearly double the current estimate from the USDA.  Similar to the corn scenario, this assumes no demand adjustments.  The USDA is already factoring in an additional 400MM bushels of exports to China for new crop, which would put the total just 125MM bushels shy of the prior export record set back in 16/17.  Since then, Brazil has added an additional 1B bushels of soybean production, so achieving this export number is no small feat.
  • One final comment on the StoneX estimate…AGTT reporting that Stone actually has a historical tendency to come in below the USDA's August estimate.  In fact, the last 5 years they've been below the USDA by an average of 1.6%...which would put the USDA estimate next week at 185.3 bpa for corn.  Pretty remarkable to think of yield numbers this high!
  • The USDA reported corn conditions unchanged at 72% excellent yesterday.  The ECB continues to see improvements, with OH up 3% and IL/IN up 2%, respectively.  As bad as its been in OH, the current rating of 52% G/E is only 1% behind the 5-year average.  IA was the big downside leader in ratings this week, down another 4% vs the prior week as the western part of the state remains parched and in dire need of precipitation.
State by state StoneX yield projections for Corn/Soybeans as of August 3:
Indiana 185/59
Ohio 185/59
Illinois 212/68
Iowa 202/60
Michigan 165/48
Wisconsin 181/57
Minnesota 202/55
Missouri 168/50
Nebraska 193/61
North Dakota 155/38
South Dakota 165/49
Kansas 142/42

  • It's been a fairly quiet overnight session - with both corn and soybeans trading either side of unchanged.  With the current benign weather forecast, bulls are hoping for continued Chinese demand to keep this market from continuing it's steady decline.
  • Weekend weather featured below normal temps for nearly the entire cornbelt, while much of the ECB received widespread rains.  The forecast for the next 15 days is warmer (normal/slightly above normal temps), while meaningful rainfall chances exist in the 6-10 and 8-14 day forecast. Western IA still remains in desperate need of a drink - so that area will continue to be watched very closely.
  • Friday's CFTC report showed funds selling just 6k contract of corn (now 143k contracts short) while they were net buyers of 12k contracts of soybeans. 
  • Not much to get excited about in the Dec corn chart.  Prices continue to hold the downtrend support, with $3.22 being a very critical level that needs to hold.  The high volume pocket is at $3.35 which should prove solid resistance on any short-covering bounce.

  • Weekly EIA ethanol production was up 50k BPD to 958k BPD in yesterday's report.  Stocks were also up 471k bbls at 20.3B barrels.  At this point, it looks like the USDA's 4.85B bushel estimate for 19/20 corn grind is very close, and probably signals that they will not reduce ethanol demand in the August WASDE - which if realized would be the first time they haven't cut ethanol demand in a WASDE report since March.
  • China held another reserve corn auction overnight for 4MMT (157MM bushels) and once again sold 100% of what was offered - at a lofty price of $7.39/bushel.  Total reserve auction sales now total 39MMT (1.5B bushels) since late May.  There's no doubt that corn stocks are getting tighter in China which boosts speculation that they'll need to continue to import more corn to replenish reserves.
  • Export sales released this morning were pretty dismal for corn (at least relative to recent weeks).  19/20 saw net cancellations of 1MM bushels.  For soybeans, old crop sales were just 9MM bushels which was on the lower end of estimates, but 20/21 sales were huge - totaling 122MM bushels (nearly all of which was to China as Brazil's supplies are depleted).
  • US weather remains favorable overall , however areas north of I80 will see limited rainfall into the first week of August.  Areas south of I80 see abundant rainfall and cooler temps during that timeframe.  The 10-15 day forecast features better rain chances for nearly the entire cornbelt (specifically north of I80).
  • Dec corn is nearing support at the contract low of $3.22, which also happens to be the uptrend support line on the continuous corn contract as well.  Resistance lies at Monday's high of $3.36.

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