USDA WASDE Reaction
Teucrium | June 10, 2021
Initial WASDE Reaction
The USDA released the monthly World Agricultural Supply and Demand Estimate (WASDE) Report on 06/10/2021
Top Takeaways:
#1. ’20-’21 corn ending stock[1] estimates revised lower providing some encouragement for bulls.
#2. Slight increase in ’20-’21 soybean ending stocks, not having a significant impact on futures prices.
#3. US domestic wheat balance sheet is tightening further, yet globally supplies are sufficient and weighing on prices.
The Breakdown
Corn
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 corn ending stocks will be 1.357 billion bushels which is below the average analyst estimate of 1.417 billion bushels according to Bloomberg. This is a decrease versus last month. The resulting stocks/use ratio[2] is 9.19%. Note the five-year rolling average stocks/use ratio is 13%. A lower stocks/use ratio, which indicates that supply is falling relative to expected demand, should be supportive for prices moving forward.
’21-’22 Supply
The USDA estimates ’21-’22 corn production will be 14.99 billion bushels which is below the average analyst estimate of 15.009 billion bushels. Note that the USDA yield estimate of 179.5 is largely in-line with the average analyst estimate of 179.4 bushels per acres (bpa). The USDA ending stock estimate for the ’20-’21 crop year is 1.107 billion bushels, versus the average analyst estimate for 1.203 billion bushels.
’21-’22 Demand
The USDA estimates total corn usage of 14.765 billion bushels in the ’21-’22 crop year. This is unchanged versus last month’s estimate.
Global
The USDA estimates ’21-’22 global corn ending stocks will be 289.41 million metric tons (MMT) which is above the average analyst estimate of 288.6 MMT according to Bloomberg.
Market Reaction
Corn prices are trading higher on the day presumably as bulls take into account the reduction in the ’20-’21 carry out.
Wheat
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 wheat ending stocks will be 770 million bushels which is below the average analyst estimate of 781 million bushels according to Bloomberg. The resulting stocks/use ratio is 36.57% which is significantly below the rolling five-year average stocks/use ratio of 50%.
Supply
The USDA estimates ’21-’22 wheat production will be 1.898 billion bushels which is above the average analyst estimate of 1.890 billion bushels. Note that the USDA ending stock estimate for the ’20-’21 crop year is 852 million bushels, which is 20 million bushel reduction versus last month’s WASDE estimate.
Demand
The USDA estimates total wheat usage of 2.105 billion bushels in the ’21-’22 crop year. This number is an increase from 2.095 estimated in the May WASDE.
Global
The USDA estimates ’21-’22 global wheat ending stocks will be 296.80 million metric tons (MMT) which is above the average analyst estimate of 294.6 MMT according to Bloomberg.
Market Reaction
Wheat futures are trading lower. Higher global ending stocks versus estimates appear to be outweighing the tightening of the domestic wheat balance sheet.
Soybeans
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 soybean ending stocks will be 155 million bushels which is above the average analyst estimate of 143 million bushels according to Bloomberg. The resulting stocks/use ratio is 3.50% which would be an increase from the ’20-’21 estimated stocks/use ratio of 2.93%. The rolling five-year average stocks/use ratio is 11%.
Supply
The USDA estimates ’21-’22 soybean production will be 4.405 billion bushels which is slightly below the average analyst estimate of 4.411 billion bushels. Note that the USDA yield estimate of 50.8 are in-line with the average analyst estimate of 50.8 bushels per acre. The USDA ending stock estimate for the ’20-’21 crop year is 130 million bushels, which is an increase of 10 million bushels versus last month’s WASDE estimate and higher versus the average analyst estimate for 122 million bushels.
Demand
The USDA estimates total soybean usage of 4.420 billion bushels in the ’21-’22 crop year. This number remains unchanged since the May report.
Global
The USDA estimates ’21-’22 global soybean ending stocks will be 92.55 million metric tons (MMT) which is above the average analyst estimate of 91.1 (MMT) according to Bloomberg.
Market Reaction
Soybean futures took a turn lower following the report. An increase in the ’20-’21 carryout estimates present a “less dire” picture of the soybean balance sheet. That said the soybean balance sheet remains historically tight.
[1] Ending Stocks (also called carry-out): The amount of a crop that will be, or is, available at the beginning gof the crop year from the previous year’s harvest.
[2] Stocks/Use Ratio: Ending stocks divided by total usage.