Is a ‘Neutral’ WASDE Report Positive or Negative?

By Dave Kanicki posted on October 12, 2015 | Posted in Data & Forecasts

The Oct. 9 World Agricultural Supply Demand Estimates report from USDA produced little change when it comes to crop receipts projections. So, was it a positive or negative for ag equipment dealers and manufacturers?

Of course, it depends on what you’re comparing it to.

Most analysts are now estimating crop receipts will come in for the year down 6-7% compared with last year. Compared to a few years ago, it’s awful. Compared to the 13-14% drop that projected earlier in the year, it’s not too bad.

“The WASDE report is relevant to ag machinery names in that it helps predict crop cash receipts, the best leading indicator for ag machinery sales, including irrigation,” says C. Schon Williams, industrial machinery analyst for BB&T Capital Markets.

“Based on the latest WASDE release, our estimates now indicate that farm cash receipts will be down 6.8% year-over-year during the 2015-16 growing season, a slightly steeper decline vs. September estimates,” he told investors in a note.

He adds that it presents a continued downside risk to ag machinery demand estimates.

To analysts looking to determine which direction stocks values that they study are going. Anything not rising isn’t good because the market likes growth.

On the other hand, for those of us trying to determine when farmers will start increasing their equipment purchases, stable is OK. If it’s not declining, it’s not getting worse.

In any case, there did appear to be some positives coming from the most recent WASDE report. According to the BB&T analyst, production estimates for corn, soybeans and wheat came down vs. USDA August estimates. In turn, the average price range for corn rose, wheat narrowed and soybeans were unchanged.

Here’s William’s summary of the October WASDE report:

Corn: $52 Billion U.S. Cash Crop

The USDA projects 2015-16 US corn production to decrease to 13.56 billion bushels (vs. 13.59 billion last month). This month's estimate for yield per acre of 168 bushels/acre is slightly better than last month’s 167.5. On a global basis, export estimates remained unchanged from the previous month. Ending U.S. stocks for 2015-16 are expected to come in at 1.561 million bushels, a decrease of 11.3% vs. last year. The USDA raised the 2015-16 season price range for corn at $3.50-$4.10 vs. $3.45-$4.05 last month.

Soybeans: $36 Billion U.S. Cash Crop

October USDA projections for 2015-16 soybean production of 3.88 billion bushels represent a slight decrease vs. the September release. Additionally, expected yields slightly increased to 47.2 bushels/acre vs. 47.1 last month. Ending soybean stocks for 2015-16 move lower to 425 million bushels, down from last month's 450 million figure. Exports also moved lower, decreasing from 1,775 million last month to 1,675 million this month. The USDA projects the 2015-16 season average price for soybeans to be $8.40-$9.90 per bushel, unchanged vs. last month's estimate.

Wheat: $11 Billion U.S. Cash Crop

The latest U.S. wheat production estimates for the 2015-16 year of 2.05 billion bushels are down from the prior report estimates of 2.14 billion. Projected yield per harvested acre is 43.6 bushels, also down from last month, but mostly in line year-over-year. Ending wheat stocks of 861 million bushels are now 14.3% higher than last year's forecast of 753 million. The updated 2015-16 range for wheat prices is $4.75-$5.25, compressed by $0.10 on both ends of the range when compared to last month.

Dave Kanicki

Dave Kanicki is the former Editor/Publisher (retired in 2020) Editor & Publisher of Ag Equipment Intelligence (AEI) and its related research, reports and broadcast channels. He joined Lessiter Publications in 2005 after decades of experience as an Editor & Publisher of metals manufacturing titles. His Farm Equipment and AEI work has been nationally recognized by both trade business and business press associations. He is a graduate of Central Michigan University.

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