USDA WASDE Reaction 08/12/2020 | Blog

Our Immediate reaction and takeawyas from the WASDE Report

Corn

The USDA increased their projected average yield per acre from 178.5 million bushels per acre (bpa) to 181.8 million bpa. The rise in yield expectations presumably is due to the near perfect weather across most of the corn belt. As of this writing prices are slightly higher suggesting that the trade had largely priced in the increase in corn yields. Importantly, this report does not reflect any potential damage from this week’s Derecho storm which reportedly may have impacted up to 10 million acres of Iowa farmland. Note too that the USDA has increased their estimates for corn exports. This was expected given the historic amount of buying we’ve seen from China since the last report. There is “boots on the ground” talk that the corn crop is not in as good of shape as the USDA is suggesting, particularly in the Eastern Corn Belt where hot/humid overnight temperatures through the month of July may result in smaller yields vs. expectations. With the increase in export figures and overall demand the trade will be focused on crop yields moving forward. Any future downward revision to yield estimates is likely to be supportive for corn prices. 

Wheat

The USDA increased their use estimates for wheat by 25 million bushels but only increased supply estimates by 4 million bushels. The result is a tighter US balance sheet with wheat ending stocks projected at 925 million bushels which is a six year low. However, the trade appears to be focused on the global balance sheet where the USDA is forecasting ending stocks of 316.8 million tons which will be an all-time record. Still, global demand is also at an all-time high. American farmers have been planting fewer and fewer wheat acres over the last several years. In fact, this year set a record for fewest wheat acres planted in the US. Given the growing global wheat carryout US farmers might yet again plant fewer wheat acres next year. 

Soybeans

The USDA increased their soybean yield estimates from 49.8 bpa to 53.3 bpa. The increase in yields is partially offset by an increase in export estimates from 2.05 billion bushels to 2.125 billion bushels and an increase in crush estimates from 2.16 to 2.18 billion bushels. Still the USDA is now projecting soybean ending stocks to reach 610 million bushels. If achieved this would be the second largest carryout in history. Still, the high carryout number is offset by a both a record high US domestic usage number, meaning the demand for soybeans is still outstripping production, and by the second highest level of global demand for soybeans ever recorded. As of this writing the market is taking the news in stride with soybean futures prices showing modest gains. Strong Chinese buying (evident in the upward export revision) and weather will be the two major stories to watch as we head into the harvest season.