USDA WASDE Reaction

Our immediate reaction and analysis of the WASDE report

Corn

The USDA domestic balance sheet for corn remains unchanged from the November WASDE Report.

The USDA left its projected corn production estimates unchanged at 14.507 billion bushels with no change to yield and harvest acres estimates from November.

Export estimates also remain unchanged month over month. Note that in November the USDA increased the US corn export estimate by 325 million bushels to the current level of 2.65 billion. 

Globally the USDA has reduced ending stock expectations by 2.47 million metric tons (MMT), equivalent to approximately 97 million bushels. The global tightening reflects a slight downward revision in production estimates against an increase in total usage. 

A tightening global balance sheet was not enough to feed corn bulls today as analysts on average were expecting the USDA to revise US corn ending stocks lower. The immediate market reaction was negative with corn prices giving back the price gains seen earlier in the day. 

The lack of revisions in the domestic corn WASDE means that attention will turn to the January report which is an increasingly important report as the trade may be expecting larger revisions. 

Wheat

The USDA lowered its ending stock estimate to 862 million bushels. This is a 15-million-bushel reduction reflecting a 10 million bushels increase in exports and a 5 million bushel decrease in imports. 

The average analyst estimate was for US ending stocks to remain unchanged.

The USDA has also lowered its global ending stock estimated by nearly 4 million metric tons (approx. 147 million bushels). Note that the outlook is for higher supplies to be offset by increased consumption, driven higher mostly by “feed and residual use for China, Australia, and the EU.”

 Chinese wheat import expectations of 8.5 MMT is at a level not seen since the 1995/96 crop year. Also, of note is the import increase for Pakistan which is occurring to alleviate “food price inflation concerns.” Pakistan is now estimated to import 2.5 million metric tons, the highest level since the 2008/2009 crop year.

The December WASDE reports global wheat ending stocks of 320.45MMT, which is below the average analyst estimate of 321.14 MMT. 

A tightening domestic and global balance sheet is feeding the bulls and at the time of this writing wheat prices remain higher post-report.

Soybeans

The USDA reduced its soybean ending stock projections by 15 million bushels down to 175 million bushels. This number was above the average analyst estimate of 168 million bushels. 

The reduction comes as the USDA increased its crushing estimates by 15 million bushels. 

The USDA also shows the global balance sheet tightening, though again not as much as analysts had hoped. Global ending stocks are now estimated to by 85.64 MMT, versus November’s estimate of 86.52 MMT. Still, analysts where looking for something closer to 85 MMT

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Even though the revisions where not in-line with analyst expectations it is worth noting that the US soybean stocks/use ratio of 3.85% is now under 4% for the first time since the ’13 – ’14 crop year. 

The global stocks/use ratio is also testing the ’13-’14 crop year level with a current reading of 23.16% (’13-’14 stocks/use was 23.08%). 

Today’s report didn’t provide much new food for bulls, and futures prices have given up early gains and moved lower as of this writing.