The latest World Agricultural Supply and Demand Estimates report from USDA gave grain markets some semi-bullish news, kicking up corn, soybean and wheat prices moderately higher soon after the report was released.

Soybeans

Soybeans found the biggest initial lift, trading 10 to 11 cents higher minutes after the report was out, on news that USDA expects new crop ending stocks to be much smaller than expected.

U.S. ending stock estimates for 2017/18 soybeans moves from 550 million bushels in April to 530 million bushels. That was much lower than the average trade estimate of 546 million bushels, although the Farm Futures estimate of 528 million bushels came very close. As for 2018/19 soybean ending stocks, USDA estimates just 415 million bushels – significantly below average trade guess of 533 million bushels. 

World ending stocks for soybeans paints a slightly different picture. USDA increased its soybean totals for 2017/18 from 3.336 billion bushels in April to 3.386 billion bushels in May. Trade analysts were expecting a decline of about 36.7 million bushels. 

Even so, USDA anticipates world 2018/19 ending stocks for soybeans will decline by 4.5% year-over-year to 3.186 billion bushels.

But the USDA is less confident about U.S. export share this coming marketing year, predicting the country’s global export share at 39% - above 2017/18 levels but otherwise the lowest share in six years. Total U.S. exports could reach 2.290 billion bushels, which would be 225 million bushels more than this marketing year.

USDA lowered its estimates for the current Argentina corn crop again, to 1.433 billion bushels. In contrast, the agency moved its Brazil soybean production estimates higher, to 4.299 billion bushels.

“The headline numbers in today’s report are shown clearly by the market’s reaction: Soybeans jumped on USDA’s low-ball carryout number for new crop,” says Farm Futures senior grain market analyst Bryce Knorr. “Unfortunately, the agency appears to be looking through rose-colored glasses on this one, at least in terms of the U.S.-China trade dispute goes.” 

That’s because the agency still anticipates China will import 6.2% more soybeans next year – but China says its imports will drop for the first time in 15 years because of higher prices from the current trade dustup, which force livestock producers there to seek alternative protein supplies.

“If everything goes back to normal (which USDA assumes), soybeans do indeed have plenty of potential,” Knorr says. “But the longer the dispute drags on, the more the market may question the outcome. That uncertainty may send big speculators to the sidelines, which would be bearish for prices.”

The other unknown right now is whether farmers are planting more soybeans due to delays in corn planting, Knorr adds. New-crop soybean futures have also been at profitable levels for most of the spring, he adds.

Corn 

USDA forecasts the 2018 corn crop at 14.0 billion bushels, which is down from a year ago based on lower forecasted acreage and yield. The agency starts 2018 corn yields – a moving target as the crop season progresses – at 174.0 bushels per acre. That number is slightly below the yield trend line and is based on some weather-adjusted factors such as a slightly slower-than-normal planting place to start the season.

The agency left U.S. 2017/18 ending corn stocks unchanged from April, at 2.182 billion bushels. Analysts were expecting that number to land somewhere between 2.101 billion and 2.227 billion bushels, including a Farm Futures estimate of 2.177 billion bushels. 

U.S. 2018/19 ending corn stocks, meantime, came in lower prior USDA estimates of 2.272 billion bushels, at just 1.682 billion bushels. That was also near but slightly higher than the average trade estimate of 1.631 billion bushels.

World 2017/18 ending corn stocks ended up nearly 1.5% lower than USDA April estimates, with 7.671 billion bushels. That number ended up very close to the average trade guess of 7.669 billion bushels, including a Farm Futures estimate of 7.657 billion bushels.

World 2018/19 corn ending stocks are projected to fall 19.5% over a year ago, reaching 6.265 billion bushels. If realized, they would reach the lowest levels since 2012/13.

For 2018/19, U.S. corn exports could slip by 125 million bushels, as increased competition from Ukraine and Russia more than compensates for decreased competition from Argentina and Brazil.

USDA’s production estimates for Argentina’s current corn crop is unchanged, at 1.299 billion bushels, but the agency’s estimates for Brazil’s current corn crop moved about 5.4% lower, to 3.425 billion bushels.

“Corn, as expected, benefited from a significant reduction in new crop carryout – simply because of the small acreage estimate USDA reported in March,” Knorr says. “With planting this week only 5% behind normal, the agency made not change to its forecast of what’s a ‘normal’ yield in a year with average growing conditions, which was left at 174.0 bushels per acre.”

Now, the corn market faces a test – some fields in the northern Great Lakes and upper Midwest might not get planted. Even so, a warm, wet may could get fields that have been planted off to a good start. 

“Seasonally, both corn and soybeans are following bullish trends that should continue,” Knorr says. “But don’t pass up opportunities to price remaining 2017 corn inventory at $4 or better futures while getting a start on new crop sales, too.” 

Wheat 

U.S. ending stocks for 2017/18 wheat, in contrast, came in slightly ahead of USDA’s April estimates of 1.064 billion bushels, moving up to 1.070 billion bushels. U.S. ending stocks for 2019/19 wheat also moved higher, from 931 million bushels to 955 million bushels. 

That was in part to USDA estimating higher 2018 all-wheat production than its April estimates of 1.741 billion bushels, deducting from some categories (such as hard red winter), but adding to others (such as soft red winter and white winter), for a total of 1.821 billion bushels – a net gain of 800 million bushels over USDA’s 2017/18 production numbers. 

Globally, 2017/18 wheat ending stocks declined slightly from USDA April estimates of 9.965 billion bushels to 9.937 billion bushels. That was slightly below the average trade guess of 9.958 billion bushels. Projected world ending stocks for 2018/19 wheat also moved moderately lower, to 9.712 billion bushels.

“Wheat got mixed news from USDA,” Knorr says. “Its winter wheat production estimate was a little lower than expected, but the real question is demand, which doesn’t appear to be improving much.”

An El Niño drought in Australia could be the market’s best hope for a rally, but those conditions may not develop until after harvest, he says.