Markets React Favorably to USDA’s December Estimates

(WASHINGTON, DC) Markets rallied on the heels of USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) released on Friday. Farm prices are projected higher for corn and cotton, while soybeans and wheat are unchanged. Globally, USDA expects wheat and corn supplies to increase, as soybean and cotton supplies decrease.

Specifically, for wheat, supplies are unchanged this month, and total use is raised seven million bushels on higher seed use that reflects increased projected 2019/20 wheat planted area. Small offsetting by-class changes are made for wheat imports and exports. Projected ending stocks are lowered seven million bushels to 949 million. The season-average farm price is unchanged at the midpoint of $5.10 per bushel and the range is narrowed to $4.90 to $5.30. Global 2018/19 wheat supplies are raised 6.7 million tons on both increased production and beginning stocks.

For corn, the outlook is for lower production, reduced feed and residual use and exports, and smaller ending stocks. Corn production is forecast at 14.626 billion bushels, down 152 million from last month on a reduced yield forecast. Feed and residual use is lowered 50 million bushels based on a smaller crop and higher prices. Exports are reduced 25 million bushels based on expectations of increased competition from Ukraine. With supply falling more than use, corn ending stocks are down 77 million bushels from last month. The season-average corn price received by producers has raised 10 cents to a midpoint of $3.60 per bushel.

For soybeans, USDA expects lower production, reduced exports, and increased ending stocks. Soybean production is forecast at 4,600 million bushels, down 90 million on lower yields. The soybean yield is projected at 52.1 bushels per acre, down 1.0 bushel mainly on reductions for Iowa and Illinois. Soybean exports are reduced by 160 million bushels to 1,900 million with lower imports projected for China. The forecast protein consumption growth rate for China is reduced, which is reflected in the limited number of U.S. export sales this fall. Although sales to China are minimal, strong sales to other markets are expected to continue, which is likely to result in a larger share of U.S. exports in the second half of the marketing year. With lower exports and slightly higher crush, soybean ending stocks are projected at 955 million bushels, up 70 million. The U.S. season-average soybean price range is forecast at $7.60 to $9.60 per bushel, unchanged at the midpoint.

For cotton, the balance sheet shows lower production, consumption, exports, and ending stocks. Production is reduced by 1.35 million bales due mainly to decreases in the Southeast, reflecting the impact of adverse weather. Domestic mill use is reduced 100,000 bales and exports are reduced 500,000 bales. Projected ending stocks in 2018/19 are 700,000 bales lower this month, at 4.3 million bales or 24 percent of use. The marketing-year-average price received by producers is forecast between 71.0 and 77.0 cents per pound, with a midpoint of 74.0 cents, 1 cent above last month. This month’s 2018/19 world supply and demand forecasts include lower beginning stocks, production, consumption, trade, and ending stocks.