How big Sept. 1 stocks numbers are could be irrelevant, given the bearishness of both corn and soybean markets heading into USDA report day.
USDA will release its quarterly Grain Stocks and Small Grains Summary reports at 11 a.m. CDT Friday.
Just how big might corn’s Sept. 1 quarterly stocks number, its de facto 2016-2017 ending stocks figure (same for soybeans and milo), be? Based on my analysis following the June 1 number of 5.225 billion bushels and USDA’s 2016-2017 total supply figure of 16.94 bb, I calculated corn ending stocks at 2.387 bb. In its June Supply and Demand report, USDA had pegged 2016-2017 ending stocks at 2.295 bb, then upped its guess to 2.370 bb in its July reports and then dipped back to 2.350 bb in this month’s round of guesses on Sept. 12.
Regardless of what USDA releases Friday, there are two constants we will know about corn’s ending stocks: First, it will be the largest number on record in 30 years. Second, USDA’s de facto ending stocks number is still based on farmer surveys, so is subject to quiet change over time. Nothing permanent, nothing written in stone, just like always.
What does the market think of corn supplies? Without the need for USDA’s estimate, noncommercial traders continue to add to their net-short futures position, reflected by a downtrend on the market’s weekly-close-only chart. At the same time, corn’s forward curve (series of futures spreads) is showing a strengthening carry, indicating commercial traders are growing increasingly bearish. Does this tell us if USDA will come in near 2.3 bb (the low end of pre-report guesses) or near 2.4 bb (the high end of pre-report guesses)? No. But the bottom line is the actual number isn’t all that important. Both sides of the market indicate a big supply situation in corn.
Sept. 1 soybean stocks are usually more interesting than corn. Again, acting as the de facto marketing-year ending stocks figure, the September quarterly Grain Stocks report for soybeans has more often than not highlighted the problems USDA has in guessing domestic ending stocks over the previous 15 months. This period’s high monthly guess from USDA of 480 million bushels occurred in both November and December 2016. This month’s Supply and Demand report showed USDA has whittled its overt bearishness back to 345 mb. As you can see in the pre-report guess table, those playing the game didn’t wander too far from USDA’s September estimate. Will they be correct? History would tell us “no.”
The past three years, USDA has overestimated domestic ending stocks, at its period high guess, by 63%. If it was off that much again this time, and based on the 480 mb guesses from last November and December, the Sept. 1 figure would be closer to 190 mb of soybeans. That isn’t likely to happen, not this time. How do we know this? Futures spreads haven’t reflected that type of bullish situation. In fact, the market’s forward curve shows a strengthening carry going back to last fall, indicating the commercial opinion has consistently grown more bearish. Following the June 1 soybean stocks number of 963 mb, and again based on last January’s total supplies and normal Q4 usage, I estimated the Sept. 1 number to come in at 402 mb. If realized, this would put USDA outside the pin-the-tail-on-the-donkey pre-report range of 355 mb to 321 mb.
SMALL GRAINS SUMMARY
The end result of this year’s Small Grains Summary report seems to be a foregone conclusion: All-wheat production numbers are expected to be the lowest since the 2002-2003 crop with the average pre-report estimate coming in at 1.725 bb. This is down slightly from USDA’s September Supply and Demand report guess of 1.739 bb and well below 2016’s 2.310 bb.
The main point of interest will be spring wheat, with harvested acres and yield still a subject of wild debate. Pre-report guesses averaged 389 mb, actually above USDA’s September estimate of 364 mb. Yet it is here the market already seems to be indicating the potential for a bullish surprise with recent action in both futures and futures spreads. Both have been in solid downtrends on weekly charts, and both seem to be turning less bearish/more bullish ahead of the release of the Sept. 29 report.
|QUARTERLY STOCKS (million bushels)|
|(Report date 9/29/17)||9/1/17||Avg||High||Low||9/1/16||Sep-17|
|SMALL GRAINS SUMMARY (million bushels)|