On Tuesday, August 12th we got this month’s version of the U.S.D.A.’s W.A.S.D.E. report which came in somewhat bullish corn, despite production still being pegged at over 14 billion bushels! Corn prices were supported by the USDA’s forecast for the national yield average to be 167.4 bu/ac, not the 170+ that the market was expecting. As a result, the 2014/15 ending stocks for corn dropped as production was below expectations and demand was increased slightly, thanks to feed, ethanol, and exports. More than a few market participants are questioning the yield numbers though as they suggest that the USDA is underestimating ear weights (i.e. average weight and number of kernels per ear). This rationale comes from the ideal growing conditions, and when matched up against 2004’s record ear weight of 0.351 lbs per, the average yield would jump up to 179.3 bu/ac (that’s a really big bearish number). Keep in mind though that the crop is behind schedule in a few major areas, which could adversely affect ear weight as the nights grow colder.
As for soybeans, average yield is seen by the U.S.D.A. as 45.4 bushels per acre, slightly above expectations, leading to a higher carryout in 14/15 of 430 million bushels and general bearish outlook. Food for thought: the last time soybean carryout was above 400 million bushels was in August of 2006 and futures were trading at $5.70 per bushel. Soybean production was left unchanged by the U.S.D.A. in Argentina and Brazil at 54M tonnes and 91M tonnes (a record!) respectively. C.N.G.O.I.C. see China’s soybean imports rising four per cent year-over-year in 2014/15 to 73 million tonnes, matching the U.S.D.A.’s most recent estimate. This is down though from the 17 per cent growth rate experienced in 2013/14 from the year previous due to larger domestic supply. Ultimately, the oilseed complex continues to be weighed down by big production and large carryout.
As for wheat, nothing really changed within the U.S. as the 2014/15 carryout was barely increased (up three million bushels to 663 million) but things elsewhere got interesting, as global production was increased by almost 11 million tonnes to a new record crop of 716 million tonnes. The U.S.D.A. cut its estimate of E.U. wheat exports by three million tonnes to 25 million tonnes, and in turn, E.U. feed wheat demand was increased by 2.5 million tonnes, all attributed to the lower quality conditions being seen in wet areas. Heading even further east, production in Former Soviet Union nations was increased by eight million tonnes, thanks to a six million-tonne increase in Russia to a 59 million-tonne crop and Ukraine’s output rising by one million tonnes to 22 million. Accordingly, 2014/15 world wheat ending stocks are seen at 193 million tonnes, three million tonnes higher than what the trade was expecting. Overall, the WASDE brought a little of everything but nothing to move the market too much. In my opinion, depending where market prices end the month of August for corn, soybeans, and wheat, the game won’t heat up too much after that as it could be where we find ourselves see-sawing around over the next year, even two.
Brennan Turner is originally from Foam Lake, SK, where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, Mr. Turner spent some time working in finance before starting FarmLead.com, a risk-free, transparent online and now mobile grain marketplace (app available for iOS and Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (firstname.lastname@example.org) or phone (1-855-332-7653).