On Thursday, Nov. 9, the USDA came out with their monthly world agricultural supply and demand estimates. Usually, November is a bit of a sleeper month but given the delayed corn harvest in the US, there were some ideas that the USDA might provide the market something. Unfortunately, it didn’t.
In the October WASDE, the USDA pegged US corn yields at 171.8 bushels per acre. Ahead of the report, traders were expecting to see an average US yield of 172.4 bushels per acre. Instead, the USDA blew all expectations out of the water with a new record yield of 175.4 bushels per acre. The previous record was set last year with a yield of 174.6 bushels per acre. What’s interesting is the last corn rating of the year pegged this year’s crop at 66 per cent good-to-excellent (G/E), 23 per cent fair, and 11 per cent poor-to-very poor (P/VP). The last corn rating of 2016 pegged the corn crop at 74 per cent G/E, 19 per cent fair, and 7 per cent P/VP. Clearly, the fringe producing states are no longer bring down averages.
For soybeans, the USDA left the average US yield at 49.5 bushels per acre. Thanks to the record acres, a record US soybean crop of 4.43 Billion bushels is still expected. However, 2017/18 carryout will reach 425 million bushels. This is more than 40 per cent higher than what 2016/17’s ending stocks were. Globally, we saw the USDA bump ending stocks and Brazil’s production and exports were increased by one million to 108 million tonnes and 65 million tonnes respectively.
For wheat, the balance sheet also wasn’t really changed. Spring wheat prices have seen a nice little bump lately but that’s because the market is pricing in more US acres being marked as “abandoned” and didn’t get harvested. We’re still a month away from the USDA’s announcement on that though.
What’s more interesting though is that the Russian Ag Ministry recently announced that they’re aiming to increase their grain export capacity to 7.5 million tonnes per month within the next three years. Currently, they’re only able to ship out five million tonnes, meaning this infrastructure expansion would increase grain export capability by 50 per cent. This year, in 2017/18, total Russian grain exports are forecasted to hit 45 million tonnes. Already, exports-to-date are up 23 per cent from where they sat a year ago. For reference, in the past 15 years, Russian grain export capacity has increased nine-fold.
Overall, recent reports like the USDA and Russia’s export goals reiterate the fact that the world is expanding its supply faster than demand.
Brennan Turner hails from Foam Lake, SK, where his family started farming the land in the early 1900s. After graduating with an economics degree from Yale University, Brennan played professional hockey and worked as a Commodity Analyst on Wall Street before starting FarmLead.com. FarmLead was named one of Canada’s top startups in 2015 and one of Forbes most innovative companies in agriculture in 2017.