Solid arguments could be made for corn and soybean quarterly stocks numbers to be bullish, bearish or neutral when released by USDA.
Let’s change things up a bit and start by looking at soybeans. The Sept. 30 Quarterly Stocks report is well known for a number of things, but mostly for shining a bright light on the overwhelming bearishness of USDA when it comes to soybeans. As DTN Analyst Todd Hultman pointed out to me, USDA has overestimated U.S. soybeans in its initial May estimates 21 out of the past 26 years, including this year. And as I’ve pointed out countless times, the last two years have seen Sept. 30 soybeans stocks (as of Sept. 1, so ending stocks for the previous marketing year) come in at roughly 36% of USDA’s peak projection over its last 17 monthly reports.
Using that last statistic and USDA’s 2015-2016 ending stocks estimate of 500 million bushels from May 2015, Friday’s round of quarterly stocks see soybeans come in near 180 mb. This would be below the average estimate of 202 mb, with only one pre-report estimate (that of 158 mb) lower. On the other end of the spectrum, analysis using demand as a percent of total supplies per quarter results in a quarterly stocks/ending stocks figure for soybeans of roughly 360 mb. This is based on Q4 demand the last 10 years, or dating back to the 2005-2006 marketing year. Tightening it even further to the last five years, soybean quarterly stocks could jump to approximately 440 mb. Note that these last two figures are well above the high end of estimates at 256 mb. It’s interesting that using USDA’s track record of inability to estimate soybean ending stocks results in a possible range from 180 mb to 440 mb.
The final comparison, and likely the most important, will be to what USDA guessed in its September Supply and Demand report. There, its bottom line for 2015-2016 soybeans read 195 mb. Again, note that this would be 39% of USDA’s May 2015 prediction and in line with what’s been seen the last two years if quarterly stocks came in at that same level.
In a nutshell, then, quarterly stocks could be too cold (bearish) for soybeans using past Q4 demand as a percent of total supplies analysis; too hot (bullish) using USDA’s recent (last two years) track record of underestimation; or just right (neutral) if quarterly stocks come in near USDA’s own September 2015-2016 ending stocks estimate.
And, finally, we need to keep in mind that, by design, the soybean quarterly stocks number will have little impact on the market if neutral or bullish. It’s after the fact, and now only registering as the beginning stocks mark for the 2016-2017 marketing year. Given early yield estimates are above expectations, the only real influence could be if quarterly stocks/ending stocks/beginning stocks are bearish, adding to growing total supplies that include expected production of roughly 4.0 billion bushels.
Now for corn: Unless USDA “accidentally” adds early harvested bushels into its Sept. 30 quarterly stocks/ending stocks, there is usually much less drama in corn as compared to soybeans. The average pre-report estimate came in at 1.757 billion bushels, up slightly from USDA’s September Supply and Demand ending stocks guess of 1.716 bb. But, it’s possible quarterly stocks could come in much higher.
Using the same Q4 demand as a percent of total supplies as before, the June 30 quarterly stocks figure of 4.722 bb implied ending stocks (as of Sept. 1) of 2.270 bb. Again, this is based on average percent of demand over the last five years. Using a 10-year average puts Q4 stocks at 2.175 bb. As with soybeans, either of the numbers derived using this method of analysis would be considered bearish for corn.
On the other hand, USDA’s track record from its peak prognostication over 17 months through the Sept. 30 final calculation is better than what was discussed in soybeans. The previous three marketing years (from 2012-2013 through 2014-2015) saw the percent of improve from 43.6% to 61.7% to 83.2% respectively. Averaging those three together gives us 63%, resulting in a possible quarterly stocks figure this time around of 1.171 bb. That type of ultra-bullishness isn’t likely to be seen. However, if we look at the pattern of improving percentages, 2015-2016 could come in close to 100%, meaning a quarterly stocks figure of 1.862 bb (from April 2016). This would again be considered bearish.
Finally, if USDA just holds close to its September ending stocks guess of 1.716 bb, it would likely be considered neutral. So just as with soybeans, all three possibilities (bullish, bearish and neutral) are in play, but yet not likely to make much of a difference to the market. Unless an outlandish number is seen (think 1.171 bb on the bull side, 2.270 bb for the bears), traders will continue to focus on an expected 2016 harvest of 15 bb.
SMALL GRAINS SUMMARY
This is fairly straight forward, but all wheat production is expected to be bearish. The average pre-report estimate came in at 2.326 bb, little changed from USDA’s August production estimate of 2.321 bb, but still almost 300 mb above the previous year’s production number of 2.052 bb. The bottom line for wheat is simple: Global supplies are at burdensome levels, so steady to larger U.S. production numbers only add to the market’s bearishness. A change will need to be seen at some point, possibly weather problems in Europe, the Black Sea region, or Australia, for the market to change its long-term outlook. Again, that isn’t likely to occur following the Sept. 30 reports.
|QUARTERLY STOCKS (million bushels)|
|(Report date 9/30/16)||9/1/16||Avg||High||Low||9/1/15||Sep-16|
|SMALL GRAINS SUMMARY (million bushels)|