USDA’s June 10 report is expected to have minimal changes despite rising demand for U.S. soybeans amid shortfalls in South American crops.
“This should be a minor report characterized by improved U.S. demand for soybeans and another (minor) revision lower for South American crops,” said Rich Nelson, chief strategist of Allendale, a research and marketing firm in McHenry, Ill.
USDA also is not expected to adjust its estimates for new crop acres or yields in the June report, because its acreage survey is still underway, according to analysts.
“I think this report will have only a minimal impact on prices,” said DuWayne Bosse, of Bolt Marketing in Britton, S.D. “Weather is a much larger driving force during the month of June.”
The main impact of the report will be its estimate of the South American harvest, but it won’t have much of an effect on prices, according to Prof. Ignacio Ciampitti, of Kansas State University.
USDA is expected to slightly decrease ending stocks for corn and soybeans, according to Alan Brugler of Brugler Marketing in Omaha, Neb.
Here are the average trade forecasts for the June 10 report, according to a Bloomberg survey of analysts:
- Corn: Ending stocks of 1.770 billion bushels for old crop (2015/16) and 2.112 billion bushels for new crop (2016/17), which would be slightly lower than USDA’s May new-crop ending stocks estimate.
- Soybeans: Ending stocks of 386 million bushels for old crop, and 298 million bushels for new crop, which would represent yet another reduction from USDA’s May new-crop ending stocks surprise of 305 million bushels.
- Wheat: Ending stocks of 980 million bushels for old crop and 1.045 billion bushels for new crop. That would exceed USDA’s May new-crop ending stocks estimate of 1.029 billion bushels, which is the biggest wheat stockpile since 1987.
While the report’s changes are expected to be minor, other factors are in play. Low interest rates are driving bullish stock and crude markets, which are boosting prices for ag commodities, according to analysts.
“Fresh money is coming in, confident that the Fed won’t raise interest rates,” observed Brugler. “Prices are up just because of that. They’re not just trading fundamentals.”
The low interest rates allow commodity and stock traders to borrow cheap money to fund a position, he explained.
So what should farmers do? Given the time frame for the growing season and the marketing year, they need to pay attention to their fields and the markets.
Agronomically, growers should be checking to ensure their emerging crops are safe from insects and weeds. “The key word is scouting,” explained Ciampitti.
And when it comes to marketing, growers may want to hedge their bets—literally. “If they haven’t done so already, they should hedge soybeans as soon as possible,” observed Bosse, noting that if soybean acres increase sharply after USDA’s June 30 Acreage report, soybean prices could fall sharply.
Farmers also are advised to keep an eye on concerns about U.S. weather. “This (concern) has changed things,” Nelson cautioned. “Stand aside from further sales until it changes again.”