Market Insider

Wheat Markets Rebound from Bearish WASDE

The USDA came out on Wednesday, September 12th with one of the most bearish WASDE reports in recent memory, destroying any pre-report expectations, especially for corn and soybeans.

Going into the September WASDE report, the market was already quite bearish on soybeans, expecting to see 2018/19 ending stocks in the US top 800 million bushels and 100 MMT globally. 

However, the numbers turned out to be even more bearish than analysts expected. Now only did U.S. soybean stocks hit an astounding 845 million bushels, but global stocks popped another 2.7 million metric tonnes (MMT) to touch just north of 108 MMT, up 14% year-over-year. For the domestic number, this is thanks to American farmers producing a record yield of 52.8 bushels per acre, up 1.2 from last month’s report and about 0.5 higher than what the market was expecting. This adds up to a record U.S. soybean crop of 4.693 billion bushels (or 127.73 MMT.

For corn, going into the report, the average pre-report guesstimate for US corn production was 14.27 billion bushels off an average yield of 177.7 bushels per acre. However, the USDA is now suggesting that average American corn yields for the 2018/19 crop will be 181.3 bushels per acre. That’s a new record, beating the previous mark – set last year, no less – by nearly 5 bushels per acre! This means 2018/19 corn production should be the second-largest on record at 14.83 billion bushels. That’s also 560 million bushels more than what the market was expecting to see.

Worldwide corn carryout was estimated by the USDA at 157.3 MMT, which is a healthy decline of 19% year-over-year, but the entire decline is basically being attributed to China working through their massive stockpiles.

The USDA stayed in their bearish ways, leaving the Canadian canola production number unchanged from August’s estimate at 21.1 MMT. Compare this against StatsCan’s August estimate of 19.2 MMT of canola production. Next Wednesday, on September 19th, we’ll hear from StatsCan again for their satellite-based crop production estimates. For perspective, in the last 3 years that this sort of report has come out, the Canadian canola crop has been increased by an average of 1.279 MMT from what they said in their August 31 report.

This explicitly means that, compared to StatsCan’s report from 3 weeks ago of 19.2 MMT of Canadian canola production, this next StatsCan data-infused estimate could come in at 20.44 MMT.

U.S. canola production was pegged by the USDA at 67 million bushels (or 1.52 MMT). More globally though, the USDA revised total rapeseed production lower, include declines in Europe and China. Strong domestic crush and exports should continue to help Canadian canola prices, but we must keep in mind that canola is very expensive to soybeans right now.

Getting into wheat, we saw a surprising upgrade to the Russian crop by 3 MMT, now estimated to be at 71 MMT. Keep in mind that this is still 14 MMT below last year’s record haul. The USDA downgraded both Canadian and Australian crops to 31.5 MMT and 20 MMT respectively. However, these numbers are both bigger than the 29 MMT of total wheat production estimated by StatsCan and the 19.1 MMT forecasted by ABARES this week.

To end the year, 2018/19 global wheat ending stocks were pegged by the USDA at 261.3 MMT. Going into the report, the market was expecting 257.2 MMT, and August’s number was 259 MMT.

In the U.S., 2018/19 hard red spring wheat ending stocks was lowered by 10 million bushels from the August estimate, despite production being stayed at 583 million bushels (or 15.9 MMT). Food for thought: US HRS wheat carryout has now being lowered by a combined 31 million bushels in the past two WASDE reports.

On that note, hard red spring wheat prices in Minneapolis actually ended the week in the green, up 2 cents to $5.72 on the December 2018 contract, thanks to the contract rallying a dime on Friday.

Rounding out the September WASDE, U.S. durum ending stocks were raised by 5 million bushels to 36 million (the same as last 2 years!). Also worth mentioning is that the USDA is expecting way more US durum exports in 2018/19 compared to 2017/18. Last Wednesday, the USDA projected that 2018/19 American durum exports will top 30 million bushels (or 816,000 MT). This is 67% more than the 18 million bushels (490,000 MT) that the USDA said shipped out in 2017/18.

Speaking of exports, specific for the first week of September, US durum exports totaled just under 19,400 MT. So far in the 2018/19 crop year, the US has exported a little more than 86,000 MT MT of durum wheat. This is down 17% year-over-year and well below the 5-year average for this time of year.

Comparably, total Canadian durum exports through the first week of September are sitting at just 314,100 MT, down 40% year-over-year. Keep in mind that, at this point a year ago, Canadian exports were still filling boats for Italy. Except for one load in this past spring, Italy stopped buying Canadian durum last October.

Despite the bearish nature of the USDA’s WASDE report this month, we’re seeing a lot of social media posts of the negative weather (read: snow) impacting Harvest 2018 in Western Canada. This obviously brings back the memories of the battle of Harvest 2016.

From a price direction, something to keep in mind here is that back in the 2016/17 crop year, grain prices didn’t rally as much as everyone was hoping, meaning we should keep our expectations in check.

Second, it became really important to get your grain tested and know your quality. We’ve built a simple tool called to help you do just that.

To growth,

Brennan Turner 

President & CEO |