Initial Reaction to the USDA World Agricultural Supply and Demand Estimate (WASDE) Report

Teucrium | February 9, 2022

Top Takeaways:

1. Soybean production estimates revised lower for Brazil, Argentina, and Paraguay.

2. Given today’s muted price action the trade likely believes that current global grain prices are fair

3. Attention will now turn to the Annual Ag Outlook conference held at the end of February.  We’ll be watching for the early indication of planting expectations. 

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 1.498 billion bushels according to Bloomberg and unchanged versus last month.  The stocks/use ratio[2] remains unchanged at 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 unchanged versus last month.  Note that the USDA yield estimate of 177 was also unchanged.

Usage

The USDA estimates total corn usage of 14.835 billion bushels in the ’21-’22 crop year.  This is also unchanged versus last month 

Global

The USDA estimates ’21-’22 global corn ending stocks will be 302.22 million metric tons (MMT) which is above the average analyst estimate of 299.5 MMT according to Bloomberg. 

Market Reaction

Front month corn futures fell in the wake of the report but are still up for the day.  No changes on the domestica balance sheet.  Bulls will likely point to the small reduction to Brazilian corn production as the first corn crop there has suffered duress due to dry conditions.  Bears however will point out that second crop corn is the larger of the two crops and much more important to overall production. 

Wheat

’21-‘22 Ending Stocks

The USDA estimates ’21-’22 wheat ending stocks will be 648 million bushels which is above the average analyst estimate of 634 million bushels according to Bloomberg.  The resulting stocks/use ratio is down to 33.35% 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 1.943 billion bushels in the ’21-’22 crop year.  This number is down 20 million bushels versus the January WASDE estimate. 

Global

The USDA estimates ’21-’22 global wheat ending stocks will be 278.21 million metric tons (MMT) which is below the average analyst estimate of 280.3 MMT according to Bloomberg. 

Market Reaction

Front month wheat futures are traded lower immediately following the release of the report and are now fighting to rebound to flat on the day.  Domestic wheat stocks are tight, and the global balance sheet is getting tighter.  However, all of this is likely already priced in given the market action today.  Geo-politics, namely the Russia/Ukraine conflict remains the wild card for wheat in the near-term.      

Soybeans

’21-‘22 Ending Stocks

The USDA estimates ’21-’22 soybean ending stocks will be 325 million bushels which is above the average analyst estimate of 316 million bushels according to Bloomberg.  The resulting stocks/use ratio is 7.4%. 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 unchanged versus last month.  Note that the USDA yield estimate of 51.4 bushels per acre is also unchanged versus last month.

Usage

The USDA estimates total soybean usage of 4.382 billion bushels in the ’21-’22 crop year, 7 million bushels above the January estimate.

Global

The USDA estimates ’21-’22 global soybean ending stocks will be 92.83 million metric tons (MMT) which is above the average analyst estimate of 91.4 (MMT) according to Bloomberg. 

Market Reaction

March Soybean futures are down slightly following the report, thought they are recovering somewhat as of this writing.  Markets got the lower revision to South American production as expected.  Yet, the USDA is still estimating higher Brazilian production when compared to some.  We may see yet additional downward revisions in future reports. 

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