PF Reaction: Corn Carryover Estimates Top Expectations

Market reaction

Ahead of USDA’s reports, corn futures were trading 8 to 9 cents lower, soybeans were 5 to 6 cents lower, winter wheat was 8 to 9 cents lower, spring wheat was 12 to 13 cents lower and cotton was 20 to 40 points lower.

Following the USDA reports, corn is now trading 13 to 15 cents lower, soybeans are 14 to 16 cents lower, winter wheat is 13 to 15 cents lower, spring wheat is 7 to 8 cents lower and cotton is about 30 points higher in old-crop contracts and 50 points lower in new-crop contracts.

Winter wheat production

All wheat: 1.760 billion bu.; trade expected 1.748 billion bu.
-- compares to 1.824 billion bu. in June; 2.310 billion bu. in 2016
All winter wheat: 1.279 billion bu.; trade expected 1.261 billion bu.
-- compares to 1.250 billion bu. in June; 1.672 billion bu. in 2016
HRW: 758 million bu.; trade expected 745 million bu.
-- compares to 743 million bu. in June; 1.082 billion bu. in 2016
SRW: 305.6 million bu.; trade expected 303 million bu.
-- compares to 298 million bu. in June; 345 million bu. in 2016
White winter: 216.2 million bu.; trade expected 210 million bu.
-- compares to 209 million bu. in June; 286 million bu. in 2016
Other spring wheat: 422.9 million bu.; trade expected 416 million bu.
-- compares to 534 million bu. in 2016
Durum: 57.5 million bu.; trade expected 78 million bu.
-- compares to 104 million bu. in 2016

The all-wheat crop estimate came in 12 million bu. above the average pre-report trade estimate but down 64 million bushels from the June projection. All winter wheat production is up 29 million bu. from last month, with the HRW crop up 15 million bu., the SRW crop up 7.6 million bu., and the white winter wheat crop up 7.2 million bu. from last month.

Other spring wheat production came in nearly 7 million bu. above pre-report trade expectations but down about 111 million bu. from last year. Also, USDA’s June all-wheat production projection implied a spring wheat crop of 574 million bu. and today’s survey-based estimate is about 151 million bu. below last month.

The durum wheat crop is 20.5 million bu. below the average pre-report trade guess (a miss of 26%) and down 46.5 million bu. (44.7%) from last year.

USDA now puts the winter-wheat national average yield at 49.7 bu. per acre, up 0.8 bu. per acre from the June estimate. It now puts the Kansas winter wheat yield at 47 bu. per acre, up 3 bu. per acre from last month. The Oklahoma yield is steady at 33 bu. per acre and the Texas winter wheat yield is down 2 bu. per acre from last month to 28 bu. per acre. Nebraska’s winter wheat yield is steady with last month at 46 bu. per acre and South Dakota’s winter wheat yield is at 43 bu. per acre, down 7 bu. from USDA’s estimate last month.

The national average spring wheat yield is put at 30.9 bu. per acre, down 6.9 bu. per acre from last year. USDA puts the North Dakota yield at 38 bu. per acre, Montana at 26 bu. per acre, Minnesota at 61 bu. per acre and South Dakota at 34 bu. per acre.

The national average durum yield is estimated at 30.9 bu. per acre, down 13.1 bu. per acre from year-ago.

U.S. carryover

Corn: 2.370 billion bu. for 2016-17; up from 2.295 billion bu. in June
-- 2.325 billion bu. for 2017-18; up from 2.110 billion bu. in June
Beans: 410 million bu. for 2016-17; down from 450 million bu. in June
-- 460 million bu. for 2017-18; down from 495 million bu. in June
Wheat: 1.184 billion bu. for 2016-17; up from 1.161 billion bu. in June
-- 938 million bu. for 2017-18; up from 924 million bu. in June
Cotton: 3.2 million bales for 2016-17; unch. from 3.2 million bales in June
-- 5.3 million bales for 2017-18; down from 5.5 million bales in June

Old-crop corn carryover is up 75 million bu. from last month. The only change USDA made in the balance sheet was a 75-million-bu. cut to estimated feed & residual use (which was signaled in the June Quarterly Grain Stocks Report). USDA now puts the national average on-farm cash corn price for 2016-17 at $3.25 to $3.45, unchanged from last month.

New-crop corn carryover is up 215 million bu. from last month. USDA increased total supplies by 265 million bushels (the result of bigger beginning stocks and a bigger crop projection following the 890,000-acre-increase in corn acres in the June 30 Acreage Report). Yield was unchanged from last month at USDA’s trendline of 170.7 bu. per acre. On the demand side of the new-crop balance sheet, USDA increased feed & residual use by 50 million bushels. USDA now puts the national average on-farm cash corn price for 2017-18 at $2.90 to $3.70, down a dime on both ends of the range from last month.

USDA cut old-crop soybean carryover by 40 million bu. from last month. It increased estimated exports by 50 million bu. (to 2.1 billion bu.) and partially offset that increase with a 10-million-bu. cut to estimated crush (1.9 billion bushels). USDA puts the national average on-farm cash bean price for 2016-17 at $9.50, down a nickel from last month.

New-crop bean carryover was cut 35 million bu. from last month. USDA cut total new-crop bean supplies by 35 million bushels (smaller beginning stocks offset the slightly bigger crop projection). USDA made no changes to the demand-side of the new-crop bean balance sheet. USDA now puts the national average on-farm cash bean price for 2017-18 at $8.40 to $10.40, up a dime on both ends of the range from last month.

Old-crop wheat carryover was set by the June Quarterly Grain Stocks Report. To square the books to grain stocks, USDA increased imports by 1 million bushels. On the demand side, USDA cut feed & residual use by 42 million and increased exports by 20 million bushels. The national average on-farm cash wheat price for 2016-17 is put at $3.89, down a penny from last month.

New-crop wheat carryover is up 14 million bu. from last month. Total wheat supplies are down 31 million bu. from last month (bigger beginning stocks partially offset the smaller crop estimate). Imports were also increased 10 million bu. from last month. On the demand side, USDA cut feed & residual use by 20 million bu. and exports by 25 million bushels. USDA now puts the national average on-farm cash wheat price for the 2017-18 marketing year at $4.40 to $5.20, up 50 cents on both ends of the range from last month.

Old-crop cotton carryover is unchanged from last month. USDA made no changes to the supply or demand side of the old-crop cotton balance sheet. The national average on-farm cash cotton price for 2016-17 is now put at 68 cents, down a half-cent from last month.

New-crop cotton carryover is down 200,000 bales from last month. USDA increased the projected 2017-crop cotton yield by 6 lbs. per acre to 816 pounds. That was offset by a 200,000-acre cut to estimated harvested acres, for a 200,000-bale drop in the estimated crop (19.0 million bales). USDA made no changes to estimated new-crop cotton use. It puts the national average on-farm cash cotton price for 2017-18 at 54 cents to 68 cents, unchanged on the bottom end of the range, but down 6 cents on the top end of the range from last month.

Global carryover

Corn: 227.51 for 2016-17; up from 224.59 MMT in June
-- 200.81 MMT for 2017-18; up from 194.33 MMT in June
Beans: 94.78 MMT for 2016-17; up from 93.21 MMT in June
-- 93.53 MMT for 2017-18; up from 92.22 MMT in June
Wheat: 258.05 MMT for 2016-17; up from 256.43 MMT in June
-- 260.6 MMT for 2017-18; down from 261.19 MMT in June
Cotton: 90.27 million bales for 2016-17; up from 89.34 million bales in June
-- 88.73 million bales for 2017-18; up from 87.71 million bales in June