Initial WASDE Reaction: September 12, 2022
Teucrium | September 12, 2022
Top Takeaways:
#1. Soybean surprise – both Area Harvested and Yield per Harvested Acre Revised Significantly Lower
#2. Corn balance sheet seen tightening further with lower US yields and Area Harvested.
#3. Both US Corn and Soybean balance sheets are tightening as production is not keeping up with usage.
The Breakdown
Corn
Ending Stocks
The USDA estimates ’22-’23 corn ending stocks will be 1.219 billion bushels which is above the average analyst estimate of 1.195 billion bushels according to Bloomberg. This is a 169 million bushel decrease versus last month. The resulting stocks/use[1] ratio is 8.54%. Note the five-year rolling average stocks/use ratio is 12.47%.
Supply
The USDA estimates corn production will be 13.944 billion bushels which is below the average analyst estimate of 14.089 billion bushels. Yield estimates were reduced to 172.5 bushels per acre (bpa) versus the previous estimate of 175.4 bpa.
Demand
The USDA estimates total corn usage of 14.275 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 304.53 million metric tons (MMT) which is above the average analyst estimate of 301.7 MMT according to Bloomberg, yet below the August estimate of 306.7 MMT.
Market Reaction
December corn futures advanced on the heels of the report clearing an area of perceived price resistance at $6.85 per bushel. As of this writing the December contract us up nearly 2% on the day.
Watch $6.85 on Dec.
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 618 million bushels according to Bloomberg. The resulting stocks/use ratio is 31.39% which is significantly below the rolling five-year average stocks/use ratio of 45.8%.
Supply
The USDA estimates wheat production will be 1.783 billion bushels which is unchanged versus last month.
Demand
The USDA estimates total wheat usage of 1.943 billion bushels also unchanged versus last month. 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 268.57 million metric tons (MMT) which is above the average analyst estimate of 268.2 MMT according to Bloomberg.
Market Reaction
The December wheat futures contract had been trading lower on the day and recouped some losses in the wake of the report. Wheat futures have rallied over the past few weeks and the December contract appears to be bumping up against near term price resistance around $8.7250. Overall, this report carried a slightly bearish tone, which add downward pricing pressure in the near-term.
Soybeans
Ending Stocks
The USDA estimates soybean ending stocks will be 200 million bushels which is significantly below above the average analyst estimate of 246 million bushels according to Bloomberg. The resulting stocks/use ratio is 4.51% compared to the rolling five-year average stocks/use ratio of 11.49%.
Supply
The USDA estimates soybean production will be 4.378 billion bushels which is below the analyst estimate of 4.5 billion bushels. Yield estimates were decreased to 50.5 bushels per acre, versus 51.9 bpa in the August report.
Demand
The USDA estimates total soybean usage of 4.433 billion bushels which exceeds the production estimate. This is the 3rd consecutive crop year where usage is set to exceed production.
Global
The USDA estimates global soybean ending stocks will be 98.92 million metric tons (MMT) which is below the average analyst estimate of 101.2 (MMT) according to Bloomberg.
Market Reaction
The November soybean contract had been trading higher on the day and then shot higher following the WASDE release. The combination of fewer harvested acres and lower yield per harvested acre resulted in an ending stock number that was 46 million bushels below estimates. This is a significant change in the domestic balance sheet.
[1] Stocks/Use Ratio: Ending stocks divided by total usage, whereas Ending Stocks (also called carry-out) represents the amount of a crop that will be available at the end of a crop year given the estimated or actual beginning stocks, production, and usage.