Unprecedented Year Could Spark Unprecedented Changes in WASDE Report

Jim McCormick July WADSE
The July WASDE report typically doesn't create many fireworks, but an already historic year could cause the WASDE and Crop Production reports to yield some surprises. ( USDA )

USDA is set to release its latest Crop Production and WASDE reports Thursday. Analysts say the July reports typically don’t spark many fireworks in the market, however, 2019 is an unprecedented year that could cause USDA to make some surprise changes. According to Jim McCormick of AgMarket.Net, this July report matters to the markets. 

“A lot of people looking for the soybean yield to maybe slide down a little bit, just based on the crop ratings being so poor,” he said.

Trimming the national yield could create a bullish reaction in soybeans, he added. The anticipation of the move is one reason the market saw strength on Wednesday. However, McCormick thinks corn is a different story.

“On the corn side, that's a little bit more challenging,” he said. “Traditionally, they'll take that corn acreage in June and plug it into the July WASDE report. But for almost 25 years, I can't ever remember a time where the June acreage survey came in with higher acreage numbers than what the World Board used for the WASDE estimate in June. So, that's where a little bit of confusion is coming in. Historically, they'll plug in those extra 2 million acres into the balance sheet, and that'll kind of give you a bearish reaction, because you're probably going to see overall supply grow, unless they surprise us and cut the yield.”

The tone of the grain markets on Wednesday were for a bearish reaction to the report, McCormick said adding there can always be a wildcard in the numbers released Thursday.

“What if the WASDE folks say they don't trust that (acreage) number, since USDA has already said they’re going to resurvey pretty much the whole Corn belt, because about 15.5 million acres of those planted acres that we're talking about head not actually been seeded yet,” McCormick said.

He thinks that means the report has a shot of throwing out some surprises, especially if the World Board sticks with the June Acreage Report number, which showed a small corn acreage figure. He said that could create a bullish surprise.

 “I think this is a report that you need to watch, but it's probably not going to be a game changer,” he said. “The August one's going to be the game changer because that's where you get the resurvey numbers.”

The biggest focus right now is on production, and more specifically, yield. 

“What I'm looking for right now is the yield more anything else, because the acres are going to be debatable from here on out, but they cut the yield hard in June with a 10 bushel (per acre) drop; that's almost unprecedented,” McCormick said. “In the July report, they've only adjusted the yield eight times. In 25 years, they've lowered it five times. So, the question is, ‘will they make that further step in getting this corn crop to go lower?’ The crop ratings are some of the lowest they've been in 25 years, so I think that gives you a very good idea which way they go and that may be the trend we see throughout the summer.”

He said if USDA even makes a slight adjustment to yield, it could reveal a bigger trend to watch for the remainder of the summer.