FW: FI Grain Market Update 08/10/18

PDF attached

 

USDA released their August supply and demand report

 

Initial reaction

·         Bearish CBOT grain and oilseeds commodities.

·         USDA’s initial survey of the 2018 corn and soybean production were released and both crops came in well above expectations.

·         The 2018-19 US soybean outlook this month is higher supplies, greater use, and record stocks.

·         The 2018-19 US corn outlook is for larger supplies, greater feed and residual use, increased exports, and larger ending stocks.

·         The 2018-19 US wheat outlook this month is lower supplies, greater use, and reduced stocks.

 

Soybeans

·         USDA reported a US soybean yield of 51.6, shy of the record 52.0 bushels in 2016. Six states are projected at a record.

·         US 2018-19 soybean production was estimated at 4.586 billion bushels, 179 million above an average trade guess and 276 million higher than July. This is 194 million bushels above last year.

·         US stocks of soybean for 2017-18 were lowered 35 million bushels (0.95MMT) to 430 million by USDA from last month due to an increase in crush (10) and exports (25).

·         The US 2017-18 carryout came in 30 million bushels less than a Reuters trade estimate.

·         The result decreased the STU to 10.0% versus 10.9% last month.

·         The reduction is stocks for old-crop didn’t stand a chance to what USDA did for new-crop.

·         US 2018-19 soybean stocks were estimated at a record 785 million bushels, 147 million above a Reuters trade estimate, and 205 million greater than last month.  Crush was increased 15 million bu, exports were raised 20, and residual up 1 million. The 240 million bushel increase in supplies was offset by the 36 million increase in demand, resulting in a 205 million bushel increase in stocks.

·         The 2018-19 US STU increased to 21.37 from 15.79 percent last month.

·         US soybean oil food usage for 2017-18 was increased 200 million pounds and exports left unchanged. SBO production was increased 55 million pounds after USDA increased its crush. Current year soybean oil stocks are down 145 million pounds from previous month, bullish in our opinion.

·         For new-crop, USDA increased US soybean oil production by 175 million pounds. Domestic food use was increased 200 million pounds. Stocks decreased 170 million pounds (145 lower carry in) to 2.066 billion pounds, below 2.171 billion for 2017-18.

·         USDA increased US 2017-18 soybean meal production by 200,000 short tons and decreased domestic use by 400,000 (they increased it 100k last month?) and increased exports by a large 600,000 short tons, resulting in the “new normal” unchanged carryout of 400,000 short tons.

·         New-crop US soybean meal production was increased 250,000 short tons to 48.7 million. The increased exports by 250,000 short tons to 13.350 million, below 14.100 for 2017-18.

·         2017-18 Argentina and Brazil soybean production was left unchanged. Brazil 2017-18 soybean exports were increased 800,000 tons to 75.5 million tons, 12.4MMT above 2016-17.

·         2017-18 world ending stocks decreased 0.4 million tons.

·         2018-19 world soybean production was increased 7.6 million tons to 367.1 million, 30.4 million above 2017-18.

·         2018-19 global soybean ending stocks were increased 7.7 million tons to a record 105.9 million, 10.3 million above the current year.  US soybean stocks increased 5.6 million tons.

·         USDA left new-crop Brazil and Argentina production unchanged.

·         USDA: The U.S. season-average soybean price is forecast at $7.65 to $10.15 per bushel, down $0.45 and $0.35.  Soybean meal prices are forecast at $295 to $335 per short ton, down $20 on both ends. The soybean oil price forecast at 28 to 32 cents per pound, unchanged from the previous month.

 

 

 

Corn

·         The US corn yield was projected at a record 178.4 bushels per acre. Six states were projected at record.

·         New-crop US corn production below away analysts estimates by increasing 356 million bushels from July to 14.586 billion bushels, 175 million above the trade average and 18 million below 2017.

·         US stocks of corn for 2017-18 were left unchanged at 2.027 billion by USDA from last month. There were no changes in the demand categories.

·         USDA increased new-crop US ending stocks by 132 million bushels to 1.684 billion, 48 million above an average trade guess. 

·         The result increased the new-crop STU to 11.2 percent versus 10.5% last month.

·         2018-19 feed was taken up 100 million and ethanol was left unchanged at 5.625 billion bushels. Domestic food use was taken up 100 million bushels. Exports were raised 125 million bushels to 2.350 billion, 50 below 2017-18.

·         2017-18 world corn production and stocks were lowered 0.4 million tons and stocks increased 1.6MMT. USDA cut 2017-18 Brazil corn output by 0.5 million tons to 83.0 million.

·         New-crop 2018-19 world corn production was increased 6.8 million tons and stocks were revised higher by 3.5 million tons.

·         2018-19 EU corn production was decreased 1.7 million tons to 59.8 million, 2.5MMT below 2017-18. This could go lower again next month.

·         There were no changes to China’s new-crop production of 225 million tons, despite other reports suggesting lower output.  However, CASDE raised production today from last month, but they are at 211.45 million tons, a big discrepancy.

·         USDA: The season-average corn price received by producers is lowered 20 cents at the midpoint for a range of $3.10 to $4.10 per bushel.

 

Wheat

·         USDA decreased US 2018-19 wheat production by 4 million bushels to 1.877 billion bushels, 27 million above an average trade guess.

·         Winter wheat was taken down 4 million bushels, with higher HRW (4), lower SRW (11), and higher White (4).

·         US other spring was estimated at 614 million bushels, unchanged from the previous month, 13 million above the trade and well above 416 million bushels in 2017.

·         US durum was pegged at 73 million, 1 million below the trade guess and up from 55 million in 2017.

·         USDA decreased US 2018-19 wheat stocks by 50 million bushels to 935 billion, 26 million below an average trade guess.

·         USDA decreased its 2018-19 all-wheat stocks by 50 million bushels after increasing exports by 50, increasing food use by 5, and lowering feed by 10 million.  US exports need to improve to reach USDA’s export target.

·         By class, high protein wheat stocks saw the largest drop when USDA increased its exports.

 

·         The US STU is currently at 42.9% versus 46.2% last month.

·         The bearish case in wheat is tied with the world balance, and USDA did not cut global stocks as much as the trade was looking for.

·         2018 world production was lowered 6.6 million tons (-8.4MMT last month) to 729.6 million tons, 28.4 million below 2017.

·         World ending stocks were decreased only 1.9 million to million tons to 259.0MMT, 2.6MMT above the average trade guess, and 14.1 million below 2017-18.

·         Production reduction were noted for EU (7.5), Brazil (0.2), and US (0.1).  USDA left Ukraine, Russia, Australia, and Canada unchanged.  Traders were looking for a much larger drop in EU, and downward revision for Australia and some other countries.

·         USDA: The 2018/19 season-average farm price was increased $0.10 per bushel on both ends to $4.60 to $5.60. 

 

 

USDA Executive Briefing

https://www.usda.gov/oce/commodity/wasde/Secretary_Briefing/Archive/2018/August_2018_WASDE_Lockup_Briefing.pdf

https://www.nass.usda.gov/Newsroom/Executive_Briefings/2018/08-10-2018.pdf

 

FI Price Projections:

·        September corn may now trade in a $3.65-$3.90 range. December corn is seen in a $2.80-$4.00 range.

·        September soybeans are seen in a $8.25-$9.10 range (we won’t rule out a new contract low); November $8.00-$9.50 range.

·        September soybean meal $295-335 range; December $280-$350 range.

·        September soybean oil 27.60-29.50 range; December 27.50-30.50 range.

• September Chicago wheat $5.30-$5.90 range.
• September KC $5.40-$6.00 range.
• September MN $5.75-$6.75 range.

 

 

 

See attached PDF for trade versus actual results