USDA WASDE Reaction

Top Takeaways:

1.      Much of the bearish news appears to have been priced in (likely due to an early release of updated FSA[1] acreage estimates on Wednesday. 

2.      Domestic balance sheets remain tight

3.      Month over month usage estimates increased for corn, wheat, and soybeans indicating the expectation for continued strong demand.

The Breakdown

Corn

’21-‘22 Ending Stocks

The USDA estimates ’21-’22 corn ending stocks[2] will be 1.408 billion bushels which is above the analyst estimate of 1.341 billion bushels according to Bloomberg. This is an increase versus last month. The resulting stocks/use ratio[3] is 9.5%. Note the five-year rolling average stocks/use ratio is 13.4%.

The USDA ending stock estimate for the ’20-’21 crop year is 1.187 billion bushels, versus the average analyst estimate for 1.159 billion bushels. 

Production

The USDA estimates ’21-’22 corn production will be 14.996 billion bushels which is above the average analyst estimate of 14.901 billion bushels. Note that the USDA yield estimate of 176.3 above the average analyst estimate of 175.6 bushels per acres (bpa). Month over month production estimates have increased by 246 million bushels driven by increases in both higher harvested acre estimates and increased yield projections. 

Usage

The USDA estimates total corn usage of 14.8 billion bushels in the ’21-’22 crop year. This is 150million bushels higher versus last month’s estimates. 

Global

The USDA estimates ’21-’22 global corn ending stocks will be 297.6 million metric tons (MMT) which is above the average analyst estimate of 285.1MMT according to Bloomberg. 

Market Reaction

Corn futures sold off and touched the daily low before rebounding to trade slightly higher on the day as of this writing. Much of the negative news appears to have been priced into the market, in part due to the early release of the FSA Acreage report on Wednesday. 

Wheat

’21-‘22 Ending Stocks

The USDA estimates ’21-’22 wheat ending stocks will be 615 million bushels which is slightly higher than the average analyst estimate of 613 million bushels according to Bloomberg. The resulting stocks/use ratio is down to 29.8% which is significantly below the rolling five-year average stocks/use ratio of 50.1%.

Production

The USDA estimates ’21-’22 wheat production will be 1.697 billion bushels which is below the average analyst estimate of 1.723 billion bushels and is unchanged from last month.

Usage

The USDA estimates total wheat usage of 2.061 billion bushels in the ’21-’22 crop year. This number is higher versus the 2.059 billion bushels estimated in the August WASDE. 

Global

The USDA estimates ’21-’22 global wheat ending stocks will be 283.2 million metric tons (MMT) which is above the average analyst estimate of 278.1 MMT according to Bloomberg. 

Market Reaction

After trading lower for most of the day’s session, wheat futures rallied immediately after the report was released and has since headed back down toward the intra-day low as of this writing. 

Soybeans

’21-‘22 Ending Stocks

The USDA estimates ’21-’22 soybean ending stocks will be 185 million bushels which is above the average analyst estimate of 182 million bushels according to Bloomberg. The resulting stocks/use ratio is 4.21%. The rolling five-year average stocks/use ratio is 11.4%.

The USDA ending stock estimate for the ’20-’21 crop year is 175 million bushels, above the average analyst estimate of 168 million bushels. 

Production

The USDA estimates ’21-’22 soybean production will be 4.374 billion bushels which is slightly above the average analyst estimate of 4.365 billion bushels. Note that the USDA yield estimate of 50.6 bushels per acre is in line with the average analyst estimate of 50.3 bushels per acre.

Usage

The USDA estimates total soybean usage of 4.389 billion bushels in the ’21-’22 crop year, 10 million bushels above the August estimate of 4.379 billion bushels.

Global

The USDA estimates ’21-’22 global soybean ending stocks will be 98.9 million metric tons (MMT) which is above the average analyst estimate of 96.7 (MMT) according to Bloomberg. 

Market Reaction

Soybean futures are trading higher in the wake of the report as traders are likely continuing to focus on a historically tight soybean balance sheet. Notably the USDA did not increase soybean harvested acre expectations on this report, they did however increase yield estimates by 0.6 bushels per acre. The market is taking the 30 million bushel increase in stride with the November futures contract up nearly 1% on the day. 

[1] FSA – US Department of Agriculture Farm Service Agency

[2] Ending Stocks (also called carry-out): The amount of corn that will be available at the end of the crop year, given the estimated or actual beginning stocks, production, and usage. 

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