For this month's WASDE report, analysts will be waiting to see how USDA rectifies the balance sheet on old-crop soybeans, given clear evidence that exports already exceed projected levels.
USDA’s June World Agricultural Supply and Demand Estimates, to be released Wednesday, June 11, will take a backseat to the two reports released at the end of the month, the June 30 Acreage and quarterly Grain Stocks.
Until then, old-crop soybeans will continue to be the main focus of this month’s WASDE report.
"In all likelihood, the changes in old-crop balance sheets will be minor," says Bill Tierney, chief economist with AgResource Company, an agricultural research and advisory firm based in Chicago.
However, analysts will be waiting to see how USDA rectifies the balance sheet on old-crop soybeans, given clear evidence that exports already exceed projected levels.
"Several percent of old-crop sales will be rolled over to new-crop," says Tierney.
Soybean residual, which is already at zero assuming a needed pipeline supply of 125 million bushels, will also be scrutinized. Only once has USDA shown a negative residual on soybeans in the June WASDE report.
"We believe USDA’s exports and crush numbers are too low," says Rich Nelson, chief strategist for Allendale, a brokerage firm in McHenry, Ill. "We’re adding 5 million bushels to USDA’s estimates for exports and 15 million bushels to the crush. That will be offset partially by higher imports, so 20 million bushels will not come off ending stocks."
One concern analysts have is whether the exceptionally tight stocks of old-crop soybeans will cause another mid-June and July surge in price, similar to what occurred last year.
On June 2, the spread between the July and November soybean contracts was the highest ever for that date at $2.71/bu., notes Tierney. Last year on June 2, the spread was $2.07. By June 28 of last year, the spread had increased to $3.13.
May’s WASDE report put the old-crop stocks-to-use ratio for soybeans at 3.8%, the tightest ever for May, says Tierney.
"We don’t expect any major changes on new-crop soybeans," says Nelson.
Corn Numbers Less Dramatic
Changes in corn numbers in the coming report will be less dramatic.
"I don’t look for any changes on ethanol," say Nelson.
Nelson and others are waiting for the U.S. Environmental Protection Agency to release its decision on the Renewable Fuel Standard, which should be anytime this month.
In the May WASDE report, USDA increased exports by 150 million bushels.
"I’m skeptical of that number," says Nelson.
Last year, USDA dropped the new-crop corn yield by 1.5 bu. in response to soil conditions, late planting and projected weather.
"Compared to a year ago, things are so much better this year, which has some people wondering whether USDA will raise the corn yield," says Tierney. "I think it’s possible."
If USDA does raise the yield, it likely won’t be by a market-moving amount given the projection for an already record-large crop, but it could have a psychological impact, he adds.
Allendale also anticipates that USDA will raise corn acreage by 300,000 acres and soybean acreage by 1.7 million acres when it releases its Acreage report June 30.
Allendale thinks USDA was initially way too low with its March planting estimate because of last year’s 7 million acres in prevented plantings that were spread across all three crops.