Initial WASDE Reaction
Teucrium | August 12, 2022
Initial WASDE Reaction: August 12, 2022
Top Takeaways:
#1. Global grain consumption is expected to exceed production yet again in crop year ’22-‘23
#2. US corn ending stocks were lowered by 82 million bushels. This on reduced production estimates. There are production troubles across the pond as well. The USDA cut 8 million metric tons off expected EU corn production versus the July report. The USDA now sees the global corn balance sheet tightening in ’22-’23.
#3. Increase in US soybean production versus July. US soybean inventories have declined for 3 years in a row. This year they are expected to build in ’22-23. Still a stocks/use ratio of 5.4% suggest a very tight balance sheet.
The Breakdown
Corn
Ending Stocks
The USDA estimates ’22-’23 corn ending stocks will be 1.388 billion bushels which is well below the average analyst estimate of 1.407 billion bushels according to Bloomberg. This is a 82 million bushel decrease versus last month. The resulting stocks/use ratio is 9.56%. Note the five-year rolling average stocks/use ratio is 12.4%.
Supply
The USDA estimates corn production will be 14.359 billion bushels which is below the average analyst estimate of 14.397 billion bushels. Yield estimates were reduced to 175.4 bushels per acre (bpa) versus the previous estimate of 177 bpa.
Demand
The USDA estimates total corn usage of 14.525 billion bushels, which exceeds this year’s expected production. The domestic balance sheet is tightening.
Global
The USDA estimates global corn ending stocks will be 306.68 million metric tons (MMT) which is below the average analyst estimate of 309.9 MMT according to Bloomberg.
Market Reaction
Front-month corn futures traded lower in the wake of the report. This seems counterintuitive given the lower than expected US ending stocks estimate
Wheat
Ending Stocks
The USDA estimates wheat ending stocks will be 610 million bushels which is below the average analyst estimate of 650 million bushels according to Bloomberg. The resulting stocks/use ratio is 34.2% which is significantly below the rolling five-year average stocks/use ratio of 46.4%.
Supply
The USDA estimates wheat production will be 1.783 billion bushels which is below the average analyst estimate of 1.796 billion bushels.
Demand
The USDA estimates total wheat usage of 1.943 billion bushels up from 1.912 billion in the July report. This marks the 6th crop year in a row that wheat usage has exceeded production in the US.
Global
The USDA estimates global wheat ending stocks will be 267.34 million metric tons (MMT) which is below the average analyst estimate of 268.3 MMT according to Bloomberg.
Market Reaction
Wheat futures have been trading lower all session. Here too the trade action appears counterintuitive given the bullish projections versus analyst estimates.
Soybeans
Ending Stocks
The USDA estimates soybean ending stocks will be 245 million bushels which is above the average analyst estimate of 225 million bushels according to Bloomberg. The resulting stocks/use ratio is 5.4% compared to the rolling five-year average stocks/use ratio of 11.67%.
Supply
The USDA estimates soybean production will be 4.531 billion bushels which is above the analyst estimate of 4.473 billion bushels. Yield estimates were increased to 51.9 bushels per acre, versus 51.5 bpa in the July report.
Demand
The USDA estimates total soybean usage of 4.526 billion bushels which is slightly below production estimate suggesting that the US is on track to build soybean ending stocks in the new crop year.
Global
The USDA estimates global soybean ending stocks will be 101.41 million metric tons (MMT) which is above the average analyst estimate of 99.5 (MMT) according to Bloomberg.
Market Reaction
Soybean futures have been trading lower all session, and the trade found no reason to reverse course following the report.