Tomorrow’s WASDE at 11 am central is one of the more significant USDA reports of the year. The May WASDE is notable because it is the first time the USDA publishes their supply and demand tables for new crop corn and soybeans. That means we get to see what the USDA thinks the ending stocks will be for new crop corn and beans. The big number to watch is Soybeans. Here are a few quick notes
- US Ending Stocks 2015/16 (old crop) – Soybeans are going to be interesting. Did the recent issues in South America bring demand back to the US. The range for old crop ending stocks is 395 to 445 million bushels. We were at 445 last month and most think we will be lower. The big question is how much the US added to their export sales due to South American production losses and logistical issues. If we are below 400mm tomorrow that is going to be bullish and we could go another leg higher. If we are still at 445 or higher this market could go down fast. The market has been pricing in lower stocks and for $10 soybeans to hold we need to see reductions to ending stocks
- US Ending Stocks 2016-2017 (new crop) – This could be the big one. The fact that the average analyst range is 290 to 500 million bushels means we could have some serious volatility if the USDA says one thing, and the market is positioned looking for another. If we are sub 300 then I think we go to $11 in Nov Soybeans. If we are sub 400 I think we continue to hang around $10. If we are closer to 450 0r 500 I think we can really go lower.
- Global Ending Stocks 2015-2016 – Again this is about Soybeans and it will be interesting to see how much the USDA takes it down. This will be primarily driven by how much production has been lost in South America.
- South American Crop Production – This goes hand in hand with Global Ending Stocks. The revisions downward in SA crop production will ultimately lead to lower Global stocks.
I think the soybean market is already overvalued. If old crop and new crop are over 400mm bushels then I find it hard to justify $10.00 soybeans and would expect a 30 to 60 cent sell off. If we are in the mid to high 300s then maybe these prices are justified. If for some reason the USDA feels the need to shock the market and come in at the lower end of stocks estimates, we could see some fireworks to the upside.
In my opinion, the USDA is slow to make major revisions. They would rather come down gradually in the production numbers than make a drastic move lower. I think we see old crop and new crop around 400 and the market sells soybeans because the bullish ending stock story has not materialized. In the end it is an educated guess. Considering that the funds are now long soybeans, a bearish surprise may have more room to run lower (due to funds liquidating long liquidation) than a bullish surprise (because the spec funds are already long).
US Ending Stocks 2015/16
| May # | Average Trade Est. | Trade Range | USDA April | |
| Corn | ??? | 1.841 | 1.762 – 1.890 | 1.862 |
| Soybeans | ??? | 0.426 | 0.395 – 0.445 | 0.445 |
| Wheat | ??? | 0.981 | 0.961 – 1.011 | 0.976 |
U.S. Ending Stocks 2016/17
| May # | Average Trade Est. | Trade Range | USDA April | |
| Corn | ??? | 2.294 | 1.950 – 2.555 | NA |
| Soybeans | ??? | 0.405 | 0.290 – 0.500 | NA |
| Wheat | ??? | 0.997 | 0.820 – 1.140 | NA |
Global Ending Stocks 2015/16
| May # | Average Trade Est. | Trade Range | USDA April | |
| Corn | ??? | 205.75 | 200.50 – 209.00 | 208.91 |
| Soybeans | ??? | 76.28 | 71.50 – 78.32 | 79.02 |
| Wheat | ??? | 239.77 | 238.30 – 241.20 | 239.26 |
U.S. Wheat Production
| May # | Average Trade Est. | Trade Range | 2015/16 Prod. | |
| All Winter | ??? | 1.384 | 1.220 – 1.572 | 1.370 |
| Hard Red Winter | ??? | 0.818 | 0.678 – 0.978 | 0.827 |
| SoftRed Winter | ??? | 0.364 | 0.340 – 0.399 | 0.359 |
| White Winter | ??? | 0.200 | 0.180 – 0.223 | 0.184 |
| All Wheat | ??? | 1.981 | 1.825 – 2.219 | 2.052 |
South America Crop Production 2015/16
| May # | Average Trade Est. | Trade Range | USDA April | |
| Argentine Corn | ??? | 27.64 | 27.00 – 28.50 | 28.00 |
| Argentine Soybeans | ??? | 55.73 | 53.00 – 58.00 | 59.00 |
| Brazilian Corn | ??? | 80.46 | 78.00 – 83.00 | 84.00 |
| Brazilian Soybeans | ??? | 99.42 | 98.50 – 101.50 | 100.00 |
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