USDA WASDE Reaction
Teucrium | July 12, 2021
Initial Reaction to the World Agricultural Supply and Demand Estimates (WASDE) Report
07/12/2021
Top Takeaways:
#1. Drought in US Northern Plains significantly reduces domestic wheat production
#2. USDA has yet to completely write down Brazil’s 2020-2021 corn crop production which private analysts believe is significantly lower than the USDA’s estimate of 93 million metric tons.
#3. 2021-2022 US corn exports raised by 50 million signaling continued strength in global demand for US corn.
The Breakdown
Corn
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 corn ending stocks[1] will be 1.432billion bushels which is above the analyst estimate of 1.361 billion bushels according to Bloomberg. This is an increase versus last month. The resulting stocks/use[2] ratio is 9.65%. Note the five-year rolling average stocks/use ratio is 13.4%.
Production
The USDA estimates ’21-’22 corn production will be 15.165 billion bushels which is above the average analyst estimate of 15.107 billion bushels. Note that the USDA yield estimate of 179.5 largely in line with the average analyst estimate of 178.7 bushels per acres (bpa). The USDA ending stock estimate for the ’20-’21 crop year is 1.082 billion bushels, versus the average analyst estimate for 1.071 billion bushels.
Usage
The USDA estimates total corn usage of 14.840 billion bushels in the ’21-’22 crop year. This is 75 million bushels higher versus last month’s estimates.
Global
The USDA estimates ’21-’22 global corn ending stocks will be 291.8 million metric tons (MMT) which is above the average analyst estimate of 286.5 MMT according to Bloomberg.
Market Reaction
Corn prices are trading higher on the day with a choppy trade. The report is not likely being viewed as bullish, however, it is probably not being perceived as overtly bearish either. Increased US exports and 20-21 Brazilian production estimates that many analysts will likely perceive as being out of touch with reality, are two areas that may offer bulls enough fuel on the day.
Wheat
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 wheat ending stocks will be 665 million bushels which is below the average analyst estimate of 724 million bushels according to Bloomberg. The resulting stocks/use ratio is 32.12% which is significantly below the rolling five-year average stocks/use ratio of 50.5%.
Production
The USDA estimates ’21-’22 wheat production will be 1.746 billion bushels which is below the average analyst estimate of 1.847 billion bushels and is a significant month-over-month reduction of 152 million bushels. Note that the USDA ending stock estimate for the ’20-’21 crop year is 844 million bushels, which is an 8-million-bushel reduction versus last month’s WASDE estimate.
Usage
The USDA estimates total wheat usage of 2.070 billion bushels in the ’21-’22 crop year. This number is a reduction from the 2.105 billion bushels estimated in the May WASDE.
Global
The USDA estimates ’21-’22 global wheat ending stocks will be 291.68 million metric tons (MMT) which is below the average analyst estimate of 295.8 MMT according to Bloomberg.
Market Reaction
As of this writing, wheat futures are trading at session highs. The drought in the US Northern Plains is having a direct impact on the US Spring Wheat crop. The reality of a significantly lower US wheat crop versus last month’s estimates will likely be supportive for wheat prices today, and in the near term moving forward.
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 147 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 2.97%. The rolling five-year average stocks/use ratio is 11%.
Production
The USDA estimates ’21-’22 soybean production will be 4.405 billion bushels which is unchanged from the June report and above the average analyst estimate of 4.392 billion bushels. Note that the USDA yield estimate of 50.8 bushels per acre is in line with the average analyst estimate of 50.6 bushels per acre. The USDA ending stock estimate for the ’20-’21 crop year is unchanged and in line with the average analyst estimate.
Usage
The USDA estimates total soybean usage of 4.420 billion bushels in the ’21-’22 crop year. This number remains unchanged since the June report.
Global
The USDA estimates ’21-’22 global soybean ending stocks will be 94.49 million metric tons (MMT) which is above the average analyst estimate of 92.6 (MMT) according to Bloomberg.
Market Reaction
Soybean prices are off their highs on the day but remain higher on the session. This report was basically a non-event for the soybean market. August is typically a critical weather month for soybeans. As such the trade is likely to continue to focus on the forecast for indications on US soybean production. The soybean balance sheet remains historically tight.
[1] Ending Stocks (also called carry-out): The amount of a crop that will be available at the end of a crop year, given the estimated or actual beginning stocks, production and usage.
[2] Stocks/Use Ratio: Ending stocks divided by total usage