Special Market Update

Grain Market Commentary

Wednesday, August 8, 2018

By Greg Johnson, Executive Account Representative, The Andersons

USDA To Release Supply & Demand Report Friday, August 10

On Friday, August 10th, the USDA will release its monthly supply and demand report. The August report is typically the first report that the USDA uses objective data based on farmer surveys and actual field observations. (Up until this point, they have been using a trend line yield of 174 bpa for corn and 48.5 bpa for soybeans.)  Below are what analysts are expecting:

CORN

  1. US corn yield to increase by 2.2 bpa, from 174.0 bpa to 176.2 bpa.
  2. US corn production to increase by 181 million bushels, from 14.2 to 14.4 billion bushels.
  3. US exports to increase by 150 million bushels, from 2.225 bil. bu. To 2.375 billion bushels.
  4. US ending stocks to increase by 84 million bushels, from 1.552 bil. bu. to 1.636 billion bushels.
  5. World ending stocks to be reduced by 40 million bushels, from 7.55 bil. bushels to 7.51 bil. bus.

SOYBEANS

  1. US bean yield to increase by 1.1 bpa, from 48.5 bpa to 49.6 bpa.
  2. US bean production to increase by 97 million bushels, from 4.31 bil. bu. To 4.407 bil. bu.
  3. US ending stocks to increase by 58 million bushels, from 580 mil. bu. to 638 mil. bu.
  4. World ending stocks to increase by 40 million bushels, from 3.61 bil. bu. to 3.65 bil. bu.

WHEAT

  1. US wheat ending stocks to be reduced by 24 million bushels, from 985 mil. bu. to 961 mil bu.
  2. World ending stocks to be reduced by 160 million bushels, from 9.58 bil. bu. to 9.42 bil. bu.

The main focus for many traders and analysts in these USDA reports is typically the supply side of the equation (acres x yield = production). However, this year the demand side of the equation this year could be equally as important as the supply side of the equation. For corn, a hot dry finish to the safrinha (double crop) Brazilian corn should reduce their supply and increase U.S. exports. For soybeans, the trade war between the U.S. and China could have a big impact on exports. For wheat, a drought in several major wheat-producing countries (Germany, France, Ukraine, Russia, Australia) could translate into an increase in U.S. wheat exports. On Friday, keep your eye not only on the demand side of the equation, but also on the supply side.