USDA’s July WASDE has little effect on markets

U.S. Midwest weather likely having greater effect

MarketsFarm — There were some notable changes in the carryovers for corn, soybeans and wheat in the July supply and demand report from the U.S. Department of Agriculture released Friday.

However, the monthly world agriculture supply and demand estimates (WASDE) had very little effect on the markets, according to MarketsFarm analyst Mike Jubinville.

“I think what we’re seeing in the markets has more to do with the change in the precipitation model that came out almost simultaneously,” he said. The latest forecast from the U.S. National Oceanic Atmospheric Administration called for rain over the U.S. Midwest for the weekend.

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“That’s probably a more important issue than this USDA report,” he added, suggesting the markets had a knee-jerk reaction to the weather forecast.

“I don’t see anything [in the July report] that warrants a double-digit decline in the futures prices,” Jubinville said.

The western side of the U.S. Midwest has received rain and soil moisture levels were OK, while the eastern portion has been dry, he said. The rain would provide a boost to crops across the Midwest at a critical point in their development.

“We’re dealing in ‘the weather market silly season,’ which is typical for July,” Jubinville said, noting things could easily change in a few days.

“If these rains come, the USDA’s yield estimates maybe low and that may factor into some of the selling that’s been going on,” he added.

USDA dropped its carryover projection for 2020-21 corn from June’s report by 20.3 per cent to 2.65 billion bushels. However, the July estimate is 17.8 per cent greater than the estimated ending stocks for 2019-20.

Corn production was reduced by 6.2 per cent to 15 billion bushels as USDA’s estimate of planted acres was cut by five million, to 92 million, keeping in line with its acreage report at the end of June. Also, the department reduced its projection of harvested acres from 89.6 million to 84.0 million, while holding the yield forecast at 178.5 bushels per acre.

Total corn domestic usage remained at 5.2 billion bushels, 7.2 per cent more than in 2019-20. Exports also held at 2.15 billion bushels, keeping the 21.1 per cent jump from the previous year’s exports.

Soybean carryover for 2020-21 was increased by 7.6 per cent, to 425 million bushels. Nevertheless, that’s almost 31.5 per cent less than the 620 million bushels in leftover from the previous crop year.

Production was raised slightly by nearly a quarter of a point to 4.14 billion bushels. USDA’s July estimate stands 16.4 per cent more than the 3.55 billion bushels produced in 2019-20.

USDA bumped up June’s estimated planted soybean acres by 300,000, to now 83.8 million, and increased its projected harvest acres by 200,000, to now 83 million. The yield forecast was steady at 49.8 bu/ac.

Domestic usage was nudged up to almost 4.35 billion bushels in the July WASDE, which is significantly more than the 3.86 billion in 2019-20. USDA kept its June estimate for soybean exports of 2.05 billion bushels, which would be a 24.2 per cent increase over the previous year’s exports.

Total wheat ending stocks were raised more than 1.8 per cent from June to 942 million bushels. The July number is 9.8 per cent less than the 2019/20 carryover of 1.04 billion bushels.

Wheat production was cut by 2.8 per cent across the board from June’s report, with USDA now expecting 1.82 billion bushels in 2020-21. Compared to production in 2019-20, it’s a five per cent decline.

USDA lowered its call on planted acres from the 44.7 million acres in the June WASDE to 44.3 million in the July report. Also, the department cut its projection for harvest acres by nearly 2.7 per cent to 36.7 million acres. Yields were eased slightly, from 49.8 bu/ac. to 49.7.

There was slip of 0.9 per cent for domestic usage of all wheat, to 1.11 billion bushels, while exports remained at 950 million. The latter is 1.7 per cent more than the exports for 2019-20.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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