As bearish as the corn and soybean numbers were in the May WASDE prices could have been down more. However, the markets sold off going in as traders were expecting a big hike in production and that cushioned the blow. Yet, USDA did offer a big change over from the tighter old crop ending supplies verses the record new crop corn and soybean stocks.
The bullish surprise of the report though was wheat and hard red winter wheat production. With above average abandonment on HRW areas farmers will harvest only 67% of planted area, the lowest ratio since 1917. USDA also lowered yield 1.8 bushels per acre putting the HRW crop at 514 million, down 16 million from last year. Total winter wheat production was down 100 million bushels from the estimate. Wheat ending stocks came in at 556 million bushels, down 42 million from last year. The lowest in 16 years. Market analysts say small crops generally get smaller.
Jim McCormick with AgMarket.Net says, “That was probably the shock of the marketplace. I mean, I think to traders a little bit optimistic on the wheat crop. A lot of our clients said Hey, abandon the tide. This is a disaster. We’ve been hearing that the USDA hadn’t been reporting it that number came in today they’ve definitely showing it and the market responded You know accordingly and really kind of pushed higher in the wheat market.”
That provided some support to corn, but it was a very bearish report. With record yield and production, USDA bumped up ending stocks to 2.22 billion bushels. That’s up 805 million bushels from last year’s drought-stricken crop and one of the biggest transitions between two crop years in history. McCormick says while prices held up after the report it implies lower prices ahead.
McCormick says, “It’s definitely I’d say the most bearish number of the report Michelle, there’s no doubt about it. That number was way above the average trade estimate. And that’s putting the ending stocks close around 15% stocks to use up on from roughly 10% this year. And you know, there’s no doubt about it. If you’re a producer, you’ve got to be concerned about it.”
For soybeans the jump between old and new crop is much tighter but USDA is still forecasting record production and higher ending stocks at 335 million bushels, which is well above estimates and up 130 million bushels from last year. McCormick says that implies sub-$12 prices for soybeans.
