USDA WASDE Reaction

Our immediate reation to the WASDE report.

Corn

The USDA reduced corn ending stocks[1] by 150 million bushels to 1,552 million bushels.

Yield per harvested acre was reduced by 3.8 bushels going from 175.8 to 172 bpa (bushel per acre). 

Total use was revised lower by approximately 250 million bushels as all use categories were revised lower. Notably exports were revised lower by 100 million bushels.

Global ending stocks have also been revised lower, now at 283.83 million metric tons (MMT), down 5.13 MMT versus the December estimate. The lower global ending stocks are a result of slightly lower beginning stocks and approximately a 10 MMT reduction in production estimates.

The reduction in global production estimates stems from dryness in Argentina and a reduction of yield expectations for the first crop corn in Brazil. The USDA also reduced global use estimates; overall, however, the USDA estimates global supply to be falling faster than use. 

The further tightening of the corn balance sheet handed a win to the bulls today as near month futures contracts advanced to lock limit up[2].  

The front month corn futures contract is up over 5% on the day.

Wheat

The USDA lowered ending stocks by 26 million bushels due to increase in seed and feed and residual uses. Production estimates remain unchanged versus December. The result is an ending stock estimate of 836 million bushels and a stocks/use ratio[3] of 39.10%. Notably the wheat stocks/use ratio has not been below 40% since the ’14-’15 crop year. 

The world wheat balance sheet is tightening with a reduction of 3.31 MMT in global ending stocks. Global production estimates were lowered by 1 MMT with increased global use showing up in feed and exports. 

The market reaction is positive with front month wheat futures prices advancing nearly 5% as of this writing. 

Soybeans

The USDA lowered soybean ending stocks by 35 million bushels to 140 million bushels. 

Yields were revised lower by 0.5 bushels per acre. Notably import estimates were revised higher by 20 million bushels. The result is an import estimate of 35 million bushels, a level not seen since the ’14-’15 crop year when the US imported 33 million bushels. 

On the use side exports and crush estimates were revised higher and total use rose by 11 million bushels

The result is further tightening of the domestic balance sheet and a low stocks/use ratio of 3.07%.

The global soybean balance sheet is also see tightening by 1.33 MMT due to slightly lower production estimates and upward demand revisions to crush and export estimates. 

The market reaction is positive with prices in the front month contract advancing nearly 3.5% as of this writing. 

[1] Ending Stocks (also called carry-out): The supply available at the end of the crop year, given the estimated or

[2] The limit up price, set by the exchange, is the maximum price a futures contract is allowed to rise in any on trading session.

[3] Stocks/Use Ratio: Ending stocks divided by total usage.

Source: USDA World Agricultural Supply and Demand Estimate (WASDE) report