Check analysis of the August 2015 USDA crop production report - WASDE
Grain futures are moving higher this morning across the board following USDA reports traders viewed as bullish. Though the agency as we expected made no changes to its estimate of new crop corn and soybean yields, bigger than anticipated reductions in old crop carryout quickly turned around a bearish reaction by high frequency trading computers reading initial headlines.
USDA’s biggest surprise came in soybeans, where projected Sept. 1 stocks were slashed by 85 million bushels. While crush and export demand each went up 15 million bushels, the government also made a 50-million bushel adjustment to its estimate of so-called residual usage, another strong hint the 2014 crop was smaller than previously projected.
New crop carryout fell 50 million bushels, with increased usage and the tighter old crop carryout offsetting increased production. USDA raised its forecast of harvested acres in line with the June 30 estimate, keeping its 46-bpa trend yield for a crop of 3.885 billion bushels that was immediately discounted by the trade, along with the agency’s cut of only 50 million bushels to new crop carryout. USDA raised the average price forecast for the crop 25 cents to $9.25.
November soybeans jumped back towards last week’s highs on the news, while December corn reached its highest price in more than a year. USDA cut almost 100 million bushels from old crop corn carryout due to stronger usage for feed, ethanol and exports. While the trend yield for 2015 corn was kept at 166.8 bpa, production fell by 100 million bushels due to the lower harvested acreage reported June 30. The result was a cut of 172 million bushels from 2015 carryout, which was put at 1.599 billion bushels. USDA also raised its average cash price forecast for the crop 25 cents to $3.75.
USDA’s data for wheat was even a little better than some in the trade feared, though the numbers were in line with our expectations. Projected 2015 crop ending stocks went up 28 million bushels to 842 million. While old crop ending stocks and 2015 product both were higher, the agency said usage should offset some of the increase, due to better feed usage and exports.
USDA cut its estimate of winter wheat production, with losses seen for all three classes of the crop. But bigger spring wheat and durum acreage more than made up for the reduction, with the total crop at 2.148 billion bushels, up 27 million from the June estimate. The average cash price forecast for the crop went up 35 cents to $5.25.