After Wednesday’s WASDE report, a lot of questions followed about how USDA put their demand projections together. Are they realistic?
“I’d say no, but it kind of offsets each other. Their export target is not realistic, it’s too high, but their crush number was not realistic either,” says Arlan Suderman, StoneX Group. “That’s something USDA, like EPA, keeps underestimating when you look at the growth we’re seeing in renewable diesel, sustainable aviation fields and the number of crush facilities coming online. Investors have a reason to improve those facilities and to keep them going, so they’re going to want the soybeans.”
When it comes to exports, Suderman says China’s been taking in 2 to 3 million metric tons per month above their crush needs since May, and he expects that to continue for a few more months.
“By the time we get to exporting, they’ll have an extra 12 million metric tons built up so they won’t need to buy from us if they don’t like the prices, they don’t want to do business with us or whatever their motivation may be,” he explains.
While early reactions described the July WASDE report as bearish for grains, as the week progressed, Suderman says the trade realized it really wasn’t as bearish of report as first thought.
On the yield side, there’s not a lot of wiggle room. USDA left soybean yield at 52 bu. per acre, but DuWayne Bosse, Bolt Marketing, sees yield going either direction from here.
“Rains in August really make the soybean crop, so if we get rains in August, and you factor fewer soybean acres in a lower-yielding state like North Dakota and more acres in higher-producing states, yield actually could go up. A bushel either direction is possible,” Bosse says.
USDA did cut corn yield by 4 bu., but like soybeans, Suderman says it could go either direction from here.
Recalling his years of walking corn fields, he says girth size might have taken a hit, but some of that yield can be made up with favorable conditions moving forward. A long grain fill period can result in long kernels and make up some of that yield. But how much is realistic?
“Based on the range of possibilities, it’s probably everywhere from the upper 160s to the low 180s right now,” Suderman says. “I like the 177. I think that’s a good number, and then we see where we go from this point with the weather.”
After increasing ending stocks from June by only 5 million bushels, USDA estimates carryover at 2.262 billion bushels. What yield would put corn under the 2-billion-bushel mark?
“We probably have to yield around 171 or 169 if using my numbers, but my numbers are a little bit different than USDA’s current numbers, Bosse says.
“USDA has new crop export demand for corn up 450 million year over year, and I just don’t see that happening, not at these prices anyway,” he adds. “Our current forecasts are slow or behind the pace, so if I’m going to increase or decrease export demand by say 400 or 300 million bushels then I need yield to drop severely to go below 2 billion. It’s really hard to paint a bullish picture for the corn market at this point.”
