Initial WASDE Reaction: October 12, 2022
Teucrium | October 12, 2022
Top Takeaways:
#1. Another Soybean Surprise with the USDA leaving ending stocks unchanged at 200 million bushels vs. pre-report expectations of 245.
#2. The domestic wheat balance sheet is seen tightening even further compared to last month.
#3. US corn production was revised lower vs last month, yet the impact of lower production was partly offset by a decrease in usage.
The Breakdown
Corn
Ending Stocks
The USDA estimates ’22-’23 corn ending stocks will be 1.172 billion bushels which is above the average analyst estimate of 1.126 billion bushels according to Bloomberg. This is a 47 million bushel decrease versus last month. The resulting stocks/use[1] ratio is 8.28%. Note the five-year rolling average stocks/use ratio is 12.3%.
Supply
The USDA estimates corn production will be 13.895 billion bushels which is below the average analyst estimate of 13.904 billion bushels. Yield estimates were reduced to 171.9 bushels per acre (bpa) versus the previous estimate of 172.1 bpa.
Demand
The USDA estimates total corn usage of 14.150 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 301.19 million metric tons (MMT) which is below the average analyst estimate of 301.9 MMT according to Bloomberg.
Market Reaction
Front-month corn futures sold-off on the heels of the report, though they have recovered somewhat, but are still down for the day. The trade is likely focused on the higher-than-expected ending-stock figure.
Wheat
Ending Stocks
The USDA estimates wheat ending stocks will be 576 million bushels which is above the average analyst estimate of 563 million bushels according to Bloomberg. The resulting stocks/use ratio is 30.9% which is significantly below the rolling five-year average stocks/use ratio of 46.5%
Supply
The USDA estimates wheat production will be 1.650 billion bushels which is a 133 million bushel decline versus last month.
Demand
The USDA estimates total wheat usage of 1.863 billion bushels down 80 million bushels month-over-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 267.54 million metric tons (MMT) which is below the average analyst estimate of 267.9 MMT according to Bloomberg.
Market Reaction
Front-month wheat futures sold off on the heals of the report, though they have recovered somewhat but remain lower on the day. Note, that wheat prices have been volatile as of late as the trade remains focused on the war in the Ukraine. The weakness in price today does not appear to be related to the fundamentals of this report.
Soybeans
Ending Stocks
The USDA estimates soybean ending stocks will be 200 million bushels which is significantly below the average analyst estimate of 245 million bushels according to Bloomberg. The resulting stocks/use ratio is 4.54% compared to the rolling five-year average stocks/use ratio of 11.64%.
Supply
The USDA estimates soybean production will be 4.313 billion bushels which is below the analyst estimate of 4.380 billion bushels. Yield estimates were decreased to 49.8 bushels per acre, versus 50.5 bpa in the August report.
Demand
The USDA estimates total soybean usage of 4.402 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 100.52 million metric tons (MMT) which is above the average analyst estimate of 99.7 (MMT) according to Bloomberg.
Market Reaction
Front-month soybean futures advanced in the wake of the report as ending stocks came in 45 million bushels below expectations. The domestic balance sheet remains tight and a 45 million bushel swing inn one direction or the other is meaningful.
[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.