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October 01, 2020 | FBN Insights | Kevin McNew

Ag Markets Surprised by Stocks Report

Tightening stocks should continue to support higher prices into next year

Quarterly Corn Stocks Sharply Lower

  • USDA reported September 1 U.S. corn stocks (2019/20 ending stocks) at 1,995 million bushels.
  • This was 258 million bushels less than the USDA’s previous old crop ending stocks estimate of 2,253 million bushels. 
  • The estimate was also 255 million bushels below the average trade estimate before the report, the second biggest miss ever.
  • The reason for the discrepancy was that USDA lowered the previous quarter’s June 1 stocks by 205 million bushels.

FBN’s Take On What It Means: Yesterday’s corn stocks revision puts the U.S. corn balance sheet for 2020/21 in a much different position as beginning stocks are 258 million bushels less than previously expected. Further stocks reductions are expected as soon as next week in the USDA’s monthly WASDE report, especially as demand is updated. Tightening stocks should continue to support higher prices into next year. 

Quarterly Soybean Stocks Sharply Lower

  • USDA estimated September 1 soybean stocks at 523 million bushels.
  • The estimate was 52 million bushels below the previous ending stocks estimate of 575 million, and 53 million below the average trade estimate.
  • While it is 386 million bushels below last year, it is still the 3rd largest carryout reported.
  • June 1 stocks were revised down 5 million bushel revision to 1,381 million bushels in a routine adjustment.

FBN’s Take On What It Means:Though it probably wasn’t quite the shock provided by the corn, the loss of bean carryover stocks similarly tightens the supply/demand outlook. The potential record US soybean exports to China and La Nina related weather concerns for South American new crop production will likely keep risk premium in the market and support prices. 

Wheat Production and Stocks Lower

  • Wheat stocks as of September 1 also came in below expectations at 2,159 million bushels, 83 million below the average trade estimate.
  • The all winter wheat crop was lowered more than expected to 1,171 million bushels, down 27 million from the August estimate.
  • Most of the decrease was due to the hard red winter wheat crop being lowered 36 million bushels down to 659 million bushels.
  • The soft red winter wheat crop estimate decreased 11 million bushels down to 266 million bushels.
  • A 20 million bushel increase in the white winter wheat crop to 246 million bushels provided a partial offset.
  • The estimate for the other spring wheat crop was raised more than expected, up 9 million bushel to 586 million bushels.

FBN’s Take On What It Means: Though stocks are less than expected, supplies remain plentiful. However, the somewhat tighter balance sheet will be supportive and allow wheat to follow along if the corn and soybean markets remain elevated. 

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