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This Wasde report will have more significance than most but is unlikely to cheer bulls

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Guessing games are understandably popular - the person who gets the answer right can briefly bask in the glory.

 

But for those looking for bullish indicators for prospects for 2020-21’s corn, soybeans and wheat, tomorrow’s Wasde report for the US department of agriculture is unlikely to bring many smiles.

 

Nor will they be able to take much comfort from the retrospective figures for 2019-20. If the average trade estimates are anything to go by, then wheat and corn are headed for even bigger production in the upcoming marketing year, while soybeans will only be marginally down.

 

The wheat marketing year started on 1 June and ends next May; corn and soybeans marketing year starts on 1 September and finishes at the end of August 2021.

 

Joker in the pack

 

According to a Bloomberg survey the August Wasde report will show global corn stocks by the end of the 2020-21 marketing year at more than 319m tonnes - at least 4m tonnes higher than in its July report. Ending stocks for wheat are put at 314.7m tonnes - just 100,000 tonnes lower than the July report - and soybeans at 98m tonnes, almost 3m tonnes higher than July. These figures from the survey give the average - the highest figure for corn, for example, puts ending stocks at more than 340m tonnes.

 

Unless these estimates are wildly off the mark, the world looks set for mammoth reserves of all three grains by this time next year. Which in theory should spell thin pickings for investors focused on price volatility.

 

Except for the perennial joker in the pack - weather.

 

Patchy growing conditions

 

Not all farmers are experiencing ideal growing conditions. While the USDA this week rated the condition of 71% of the US corn crop as "good to excellent", and 74% of soybeans similarly, it downgraded the condition of the spring wheat crop from 73% "good to excellent" a week ago to 69%. The US winter wheat harvest, it said, was 90% complete, slightly lagging the five-year average of 93%.

 

Meanwhile a hurricane-force storm has brought havoc to parts of the US Corn Belt, causing severe damage to farm infrastructure and fields with growing crops. The damage is still being assessed.

 

The hurricane season does not officially end until 30 November. The US weather-watcher NOAA (National Oceanic and Atmospheric Administration) said last week that the US could be in for an extremely active hurricane season; it anticipated that 2020’s season, which started 1 June, would be "one of the most active seasonal forecasts" in more than two decades NOAA’s analysis.

 

Plenty to play for

 

While most mid-Atlantic hurricanes do not make landfall - and rarely stretch beyond the east coast - it will only take one to interrupt or wreck crop forecasts from Wasde, or anyone else. Until it’s in the silo one cannot count the crop - and even then silos can be blown over.

 

Unexpected disasters (think Covid-19, the Beirut explosion, US-China tensions) can throw finely-honed calculations awry.

 

Having said that, crop forecasters have pinned both corn and soybeans too low for five years in a row; maybe they will also prove too bullish this year too. Uncertainties will continue to dog this sector throughout the 2020-21 marketing year.

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