USDA's World Agricultural Supply and Demand Estimates (WASDE) and Production reports in June are not known for their dramatic surprises, and the latest round of estimates on Friday, June 9, did not damage that age-old reputation. Other than a few updates on South American crops, few changes were made. We will have to wait for USDA's Acreage report on June 30 and subsequent WASDE reports to learn more about this year's crops.
Starting in corn, estimates of U.S. ending corn stocks remained at 2.295 billion bushels for the current season and at 2.110 billion bushels for 2017-18. USDA continues to expect corn exports to be up 17% in 2016-17 even though total corn shipments are already up 44% from a year ago with just 13 weeks remaining.
The reason USDA's export estimate is staying at 2.225 billion bushels is Brazil. And, on that topic, USDA increased its estimate of Brazil's 2016-17 corn production from 96.0 million metric tons to 97.0 mmt while keeping Argentina's 40.0 mmt estimate unchanged. Both are significant increases from the previous year, and those supplies will soon be competing with U.S. corn.
In soybeans, USDA bumped up its estimates of U.S. ending soybean stocks by 15 million bushels, to 450 million bushels in 2016-17 and to 495 million bushels in 2017-18. Both adjustments were the result of a single reduction of 15 million bushels to the soybean crush estimate in the current season. The slower pace of crush in 2017 is no secret, but USDA's adjustments could be considered mildly bearish.
The bigger concern for soybean prices is the size of this year's U.S. planting, and the next clue of that will be released on June 30. USDA's March estimate of 89.5 million acres proposed a new record high and has already had a bearish effect on prices. After this year's wet spring put crops under water in many areas, there is a chance that soybean acres have gone higher than expected.
A quick glance at sorghum shows USDA's estimate of U.S. ending stocks was increased from 24 million to 29 million bushels as a result of a 5-million-bushel reduction in food, seed and industrial demand in the current season while USDA's export estimate was unchanged. U.S. ending stocks of oats for 2017-18 were reduced from 41 million to 37 million bushels, thanks to a slight decline in old-crop imports.
If there was a surprise in Friday's numbers, it was that USDA increased its estimate of Brazil's soybean production from 111.6 mmt to 114.0 mmt in 2016-17 and its estimate of Argentina's production from 57.0 mmt to 57.8 mmt. The increases themselves were not shocks, but 114.0 mmt for Brazil was higher than most were expecting. Even so, world soybean production is expected to roughly equal soybean use in 2017-18, a fairly neutral outlook which, if true, would take some bearish pressure off of prices.
It has been a while since the wheat market has gotten much attention in WASDE reports, but that may be changing this year with increased weather problems in North America. Friday's report, however, gave wheat watchers little to see and probably disappointed some with a 1.25 billion bushel estimate of U.S. winter wheat production, virtually the same as last month in spite of numerous concerns, including mosaic virus and just about every weather challenge in the book.
USDA's estimate of U.S. ending wheat stocks increased from 914 million to 924 million bushels, but the more important point is the ending stocks-to-use ratio is expected to drop from 52% last season to 42% in the new one. And, keep in mind, the lower estimate comes before USDA starts showing more accurate and possibly smaller production estimates.
Worldwide, USDA increased its estimate of Argentina's wheat production from 16.0 mmt to 17.0 mmt in 2016-17 and increased new-crop production estimates for Russia and Argentina by another 2.5 mmt. The changes increased USDA's world ending wheat stocks estimate for 2017-18 from 258.29 mmt to 261.19 mmt, which puts the ending stocks-to-use ratio at 35.5%.
Personally, I am still leery that USDA's estimate of a 1% drop in world wheat demand is unnecessarily bearish for 2017-18. And, of course, there is a whole growing season of uncertainty still ahead. All of which brings us back to the question of weather and that, I suspect, is where traders' focus will turn back to on Monday, June 12.