Special Market Update

Grain Market Commentary

Monday, July 9, 2018

By Greg Johnson, Executive Account Representative, The Andersons

What to expect from this week’s USDA report

This week (Thursday, July 12th at 12pm EST) the USDA will release its updated supply and demand report. This report will be very important because:

  1. The report will incorporate the updated acreage figures released on June 29th.
  2. USDA typically waits until the July report to adjust their yield estimates for corn and beans.
  3. USDA has stated that they will try to reflect the potential impact of foreign tariffs on demand.

The far right hand column shows my estimate as to where I think the corn crop is today. (FWIW, my estimate in April was for a carryout of 1.6 billion bushels of corn, which was very close to USDA’s June estimate of 1.7 billion bushels). This month, I am projecting a slightly larger carryout compared to my April estimate (1.8 billion bushels vs. 1.6 billion bushels). My major changes are:

  1. Increased acres – This is a given, since it will be based on USDA’s June 29th report.
  2. Increased yield – Even though it is too wet in a few places, the majority of the Corn Belt is in very good shape, enough to increase yield by 3 bpa. This 177 bpa estimate can and will go up or down over the next few months, but that is the best guess as of today.
  3. Increased export demand – The Brazilian safrinha corn crop (the corn crop that is double-cropped after the beans are harvested) has experienced dry weather. As a result, more export demand should shift to the U.S.

The Andersons Special Market Report Corn

For soybeans, my estimate for the July report shows ending stocks increasing from 385 million bushels to 500 million bushels. (My April estimate for soybean ending stocks was 390 million bushels, again very close to USDA’s June estimate of 385 million bushels).

I know that this is a substantial increase in ending stocks. My reasons are threefold:

  1. Increased acres – Again, this is a given, since it is based on USDA’s June 29th report.
  2. Increased yield – Beans have not handled the wet weather as well as the corn, so unlike corn, I am not projecting a record yield. But I do think (as of today) the potential is good enough to raise the yield by 0.5 bpa.
  3. The export number is the big wild card. What impact will the trade war have on USDA’s export projection? If the trade war continues for an extended period of time, the export number could be reduced even more. On the other hand, if an agreement can be reached soon, the export number could go back up.

The Andersons Special Market Report Soybeans

These numbers are just one person’s estimate. Plug your own numbers in and see how it affects the bottom line. The fundamentals tend to rule over the long run, but in the short run the psychology over the trade war can keep the funds and speculators on the sidelines, thus keeping prices lower than what they might otherwise be.