Initial Reaction to the USDA World Agricultural Supply and Demand Estimate (WASDE) Report
Teucrium | January 12, 2022
Top Takeaways:
1. Soybean prices are up on bullish cuts to South American production estimates
2. Corn rather uneventful – prices lower on a small, but unexpected revision to harvested acres which lead to an increase in ending stocks
3. Wheat lower on lower revisions for feed and exports.
The Breakdown
Corn
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 corn ending stocks[1] will be 1.54 billion bushels which is above the analyst estimate of 1.483 billion bushels according to Bloomberg. This is an increase versus last month. The resulting stocks/use ratio[2] is 10.38%. Note the five-year rolling average stocks/use ratio is 13.55%.
Production
The USDA estimates ’21-’22 corn production will be 15.115 billion bushels which is above the average analyst estimate of 15.078 billion bushels. Note that the USDA yield estimate of 177 is in line with the average analyst estimate of 177.1 bushels per acres (bpa).
Usage
The USDA estimates total corn usage of 14.835 billion bushels in the ’21-’22 crop year. This is 5 million bushels higher versus last month’s estimates.
December 1, 2021 Corn Stock
The USDA reported December 1st corn stocks at 11.647 billion bushels which is slightly above the average analyst estimate of 11.607 billion bushels.
Global
The USDA estimates ’21-’22 global corn ending stocks will be 303.07 million metric tons (MMT) which is slightly below the average analyst estimate of 303.6 MMT according to Bloomberg.
Market Reaction
Front month corn futures came under pressure on the heals of the reports showing higher than expected ending stocks. Futures traded lower immediately and then reversed course to trade in the green for a few minutes. The mixed trade is an indication that there is enough for both the bulls and bears to tussle over.
What we would otherwise consider to be a neutral/bullish report included the surprise of an increase in corn harvested acres. After considering demand adjustments, which included an increase in ethanol usage, the end result is an ending stock number which is approximately 47 million bushels higher vs. the December estimate. Importantly the figure is 57 million bushels higher than the average analyst estimate. While lower on the front month corn futures are off their lows and even traded in the green for short period of time.
Wheat
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 wheat ending stocks will be 628 million bushels which is above the average analyst estimate of 609 million bushels according to Bloomberg. The resulting stocks/use ratio is down to 31.99% which is below the rolling five-year average stocks/use ratio of 50.18%.
Production
The USDA estimates ’21-’22 wheat production will be 1.646 billion bushels which is unchanged versus last month.
Usage
The USDA estimates total wheat usage of 1.963 billion bushels in the ’21-’22 crop year. This number is lower versus the 2.003 billion bushels estimated in the December WASDE.
Global
The USDA estimates ’21-’22 global wheat ending stocks will be 279.95 million metric tons (MMT) which is above the average analyst estimate of 278.7 MMT according to Bloomberg.
Market Reaction
Front month wheat futures are trading lower in the wake of the report. Ending stocks came in higher vs average analyst expectations, driven by a decreased feed and export estimates. Note that according to the WASDE “…global wheat ending stocks are still forecast at the lowest level since 2016/17.” In our view this suggests limited downside for wheat prices, even as US prices retrace to find a globally competitive price point.
December 1, 2021 Wheat Stock
The USDA reported December 1st corn stocks at 1.389 which is below the average analyst estimate of 1.415 billion bushels.
Soybeans
’21-‘22 Ending Stocks
The USDA estimates ’21-’22 soybean ending stocks will be 350 million bushels which is below the average analyst estimate of 353 million bushels according to Bloomberg. The resulting stocks/use ratio is 8%. The rolling five-year average stocks/use ratio is 11.8%.
Production
The USDA estimates ’21-’22 soybean production will be 4.435 billion bushels which is in line with the average analyst estimate of 4.434 billion bushels. Note that the USDA yield estimate of 51.4 bushels per acre is slightly higher than the average analyst estimate of 51.3 bushels per acre.
Usage
The USDA estimates total soybean usage of 4.357 billion bushels in the ’21-’22 crop year, 1 million bushels above the December estimate.
December 1, 2021 Soybean Stock
The USDA reported December 1st corn stocks at 3.149 which is above the average analyst estimate of 3.128 billion bushels.
Global
The USDA estimates ’21-’22 global soybean ending stocks will be 95.2 million metric tons (MMT) which is below the average analyst estimate of 99.7 (MMT) according to Bloomberg.
Market Reaction
March Soybean futures are up in the wake of the reports. Bulls are likely grabbing hold of the fact that the USDA lowered South American soybean production more than was expected. Soybean prices are largely trading on weather forecasts which could mean increased volatility in the coming weeks/months.
(Note we are referencing the March futures contract as opposed to the “front month” contract, January, as volume in the January contract is extremely light given that the contract is in delivery).
[1] 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.
[2] Stocks/Use Ratio: Ending stocks divided by total usage.