USDA WASDE Reaction 10/09/2020 | Blog

Our immediate reaction and analysis of the WASDE report

Corn

The USDA reduced their projected corn production estimates by 178 million bushels due to a lower yield forecast and a reduction in harvested acre assumptions. They revised lower the average yield per acre from 178.5 million bushels per acre (bpa) to 178.4 bpa. Harvested acre estimates were reduced by 1 million acres.

Export estimates remain unchanged from the September report at 2.325 billion bushels.

Today’s report reflected the September 1 corn stocks of 1.995 billion bushels which is carried over as beginning stocks for the ’20-‘21 crop year. This is a 258-million-bushel reduction versus the September WASDE estimate.

Overall, the domestic corn balance sheet tightened month over month with projected ending stocks[1] decreasing by 336 million bushels. The stocks to use ratio[2] is now approximately 14.87% which is well below last years figure of roughly 17% and is now back in line with the five-year average of about 15%.

The USDA has increased the average farm price by $0.10 to $3.60 per bushel

At the time of this writing the market reaction appears to be positive as there were no negative surprises and the fundamentals continue to look bullish.

Wheat

The USDA lowered US wheat production by 12 million bushels largely due to a decrease yield guesses versus the September report. 

Beginning stocks are 12 million bushels lower versus the September report reflecting the lower September 1 stocks figure. Additionally, domestic use has been adjusted upward by 10 million bushels due to higher feed and residual use.

All of this contributes to a tighter US wheat balance sheet with ending stocks coming down some 42 million bushels

The stocks to use ratio is now at approximately 42% which is below last year’s figure of approximately 50.7%. It is worth noting that the wheat stocks/use ratio has not been below 50% since the ’14-’15 crop year. The five-year average is 52.5%.

The USDA has increased the Average Farm Price estimate by $.20 to $4.70.

At the time of this writing the market reaction appears to be positive with futures prices higher across the curve

Soybeans

The USDA reduced their projected soybean production estimates by 45 million bushels due to a reduction in the harvested acre estimate of 700,000 acres. Yield estimates are unchanged at 51.9 bushels per acre.

Additionally, there was a 52-million-bushel revision for beginning stocks reflecting the September stocks report.

Export estimates were increase by 75 million bushels, reflecting the strong pace of exports to date. 

Increased demand and reduced supply estimates work to bring total ending stocks down below 300 million bushels for the first time since the ’15-’16 crop year. The stocks/use ration is now just 6.42% well below the five-year average of approximately 12%. 

The USDA estimates the average farm price for the ’20-’21 crop year to be $9.80 up significantly from last year’s estimate of $8.55. 

Note, the last time the Average Farm Price estimate was above $10 was in the ’14-’15 crop year, when the stocks/use ratio was 4.9%. 

At the time of this writing the market reaction appears to be bullish with soybean futures prices higher across the curve.   

[1] Ending Stocks (also called carry-out): The supply available at the end of the crop year, given the estimated or actual beginning stocks, production, and usage.

[2] Stocks/Use Ratio: Ending stocks divided by total usage.

Source: USDA World Agricultural Supply and Demand Estimate (WASDE) report