Update: See the June 10, 2015, USDA crop production report.
Soybean traders were quick to show their bearish reactions to Tuesday's USDA crop production report, sending the actively traded July futures market to a one-month low on Tuesday and putting some months at contract lows.
Price reactions in the corn and wheat markets to USDA's numbers were minor, even though USDA hiked global wheat ending stocks.
"The 800-pound gorilla from USDA today was squatting squarely in the soybean market. The projection for carryout to rise to 500 million bushels in the coming year is as bearish as it gets," said Bryce Knorr, Farm Futures senior grain market analyst. "In fact, I'm surprised the midpoint of their average cash price forecast for the crop is $9."
Knorr said at half a billion bushels at the end of the crop year, futures, let alone cash, will have trouble holding $8.50.
Knorr has three issues with USDA's projections, the forecasted yield of 46 bushels per acre is probably too high, expected lower exports at 1.775 billion vs 2014's 1.8 billion is questionable since buyers appear to be waiting for lower prices before booking vessels, and he still believes USDA is too high on its 2014 production of nearl 3.97 billion bushels.
USDA expects the 2015 soybean harvest 3.85 billion bushels, down 3% from 2014, but larger beginning stocks and the smaller exports raised the ending stocks to 500 million.
USDA put the 2015 corn harvest at 13.6 billion bushels, down from 2014's record of 14.2 billion. Ending stocks dropped to 1.746 billion from 2014's 1.851 billion as USDA also increased feed use by 50 million bushels due to more animals being fed and raised exports to 75 million.
"USDA's corn numbers put 2015 carryout a little tighter than I project, even with their high trend yield. Yet whether carryout is at 1.746 billion or 1.855 billion, that's still too much corn," said Knorr.
This year's winter wheat harvest was estimated at 1.47 billion bushels and all wheat at 2.087 billion, up 3% from 2014. More hard red winter and white wheat should offset declines in soft red winter and spring production.
"Certainly the wheat numbers aren't friendly. USDA's estimate of winter wheat production was just 7 million bushels from my guess, and with total production approaching 2.1 billion there should be plenty to go around," said Knorr. "USDA's average cash price forecast of $5 for 2015 could be optimistic."
Globally, USDA predicts wheat production in the year ahead at nearly 719 million metric tons, down from the previous year's record 726.45 billion. However, that is still a big number.
USDA expects less wheat production in Europe, India, Russia and the Ukraine to more than offset bigger crops in China, Turkey, Morocco, Australia, Iran and Syria.
May USDA crop production report data:
2014 crop world ending stocks, USDA WASDE >>
A look at the change in winter wheat yields vs. 2014 >>