USDA WASDE Reaction
Teucrium | August 12, 2021
Initial Reaction to the World Agricultural Supply and Demand Estimates (WASDE) Report 08/12/2021
Top Takeaways:
#1. Bullish report on supply concerns in both US corn and wheat
#2. The first survey-based corn yield forecast reveals significant production issues for the driest parts of the farm belt. Given that August is a critical weather month for soybeans many will be watching closely to see if there is a similar revision in soybean yield estimates in the September WASDE.
#3. The report confirms that corn and soybean balance sheets are expected to remain tight through the 2021 – 2022 marketing season while the global wheat balance sheet also continues to tighten. We believe that the fundamentals support grain prices remaining higher for longer.
The Breakdown
Corn
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 corn ending stocks will be 1.242billion bushels which is below the analyst estimate of 1.270 billion bushels according to Bloomberg. This is a decrease versus last month. The resulting stocks/use ratio is 8.4%. Note the five-year rolling average stocks/use ratio is 13.4%.
Production
The USDA estimates ’21-’22 corn production will be 14.75 billion bushels which is below the average analyst estimate of 14.971 billion bushels. Note that the USDA yield estimate of 174.6 is well below the average analyst estimate of 177.4 bushels per acres (bpa). The USDA ending stock estimate for the ’20-’21 crop year is 1.117 billion bushels, versus the average analyst estimate for 1.103 billion bushels.
Usage
The USDA estimates total corn usage of 14.65 billion bushels in the ’21-’22 crop year. This is 190 million bushels lower versus last month’s estimates.
Global
The USDA estimates ’21-’22 global corn ending stocks will be 284.63 million metric tons (MMT) which is below the average analyst estimate of 287.6 MMT according to Bloomberg.
Market Reaction
Corn prices rallied on the dramatic downward revision to production estimates. As of this writing, the front-month corn futures contract is trading up 4.76% on the day.
Wheat
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 wheat ending stocks will be 627 million bushels which is below the average analyst estimate of 638 million bushels according to Bloomberg. The resulting stocks/use ratio is down to 30.45% 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 1.697 billion bushels which is below the average analyst estimate of 1.724 billion bushels and is a significant month-over-month reduction of 49 million bushels.
Usage
The USDA estimates total wheat usage of 2.059 billion bushels in the ’21-’22 crop year. This number is a reduction from the 2.070 billion bushels estimated in the July WASDE.
Global
The USDA estimates ’21-’22 global wheat ending stocks will be 279.06 million metric tons (MMT) which is below the average analyst estimate of 287.1 MMT according to Bloomberg.
Market Reaction
Wheat prices rallied on USDA estimates showing significant tightening in both domestic and global balance sheets. Adverse weather is the main culprit affecting production in key growing areas in the US, Canada, and Russia. The front-month wheat futures contract is up 3.748% as of this writing.
Soybeans
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 soybean ending stocks will be 155 million bushels which is below the average analyst estimate of 157million bushels according to Bloomberg. The resulting stocks/use ratio is 3.53%. The rolling five-year average stocks/use ratio is 11%.
Production
The USDA estimates ’21-’22 soybean production will be 4.339 billion bushels which is slightly below the average analyst estimate of 4.362 billion bushels. Note that the USDA yield estimate of 50 bushels per acre is in line with the average analyst estimate of 50.3 bushels per acre. The USDA ending stock estimate for the ’20-’21 crop year is 160 million bushels, above the average analyst estimate of 148 million bushels.
Usage
The USDA estimates total soybean usage of 4.379 billion bushels in the ’21-’22 crop year, 41 million bushels lower versus the July estimate.
Global
The USDA estimates ’21-’22 global soybean ending stocks will be 96.15 million metric tons (MMT) which is above the average analyst estimate of 94.7 (MMT) according to Bloomberg.
Market Reaction
Soybean prices are higher on the day, presumably being pulled higher by rising corn and wheat prices. The trade will be watching the weather closely in the coming weeks as the soybean crop enters a critical growth phase. The front-month soybean futures contract is up 1.654% as of this writing.