Initial WASDE Reaction: December 09, 2022

Teucrium | December 9, 2022

Top Takeaways:

#1. December WASDE is traditionally boring for grains

#2. The December 2022 WASDE kept that tradition alive

#3. Warm Holiday Wishes to you and Yours

 

The Breakdown

Corn

Ending Stocks

The USDA estimates ’22-’23 corn ending stocks will be 1.257 billion bushels which is above the average analyst estimate of 1.238 billion bushels according to Bloomberg. This is a 75 million bushel increase versus last month. The resulting stocks/use[1] ratio is 8.91%. Note the five-year rolling average stocks/use ratio is 12.3%.

Supply

The USDA estimates corn production will be 13.930 billion bushels which is unchanged versus last month. Yield estimates of 172.3 bushels per acre (bpa) are also unchanged.

Demand

The USDA estimates total corn usage of 14.100 billion bushels. This is 75 million bushels lower versus last month, hence the 75 million bushel increase in ending stocks. Still, usage is expected to exceed production in ’22-’23. The domestic balance sheet is tightening.

Global

The USDA estimates global corn ending stocks will be 298.4 million metric tons (MMT) which is below the average analyst estimate of 301 MMT according to Bloomberg, and below the November estimate of 300.76 MMT.

Market Reaction

No surprises in this report. Still after trading approximately 1% higher on the day the March corn futures contract gave back those gains and is currently trading slightly higher versus the open. Bears are likely focused on disappointing exports resulting from relatively high US prices.

 

Wheat

Ending Stocks

The USDA estimates wheat ending stocks will be 571 million bushels which is below the average analyst estimate of 581 million bushels according to Bloomberg. The resulting stocks/use ratio is 30.56% 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 unchanged versus last month.

Demand

The USDA estimates total wheat usage of 1.868 billion bushels. This marks the 6^th crop year in a row that wheat usage has exceeded production in the US.

Global

The USDA estimates global wheat ending stocks will be 267.33 million metric tons (MMT) which is roughly in-line with the average analyst estimate of 268 MMT according to Bloomberg.

Market Reaction

Wheat futures are slightly lower following the report. No big changes or surprises. Note however that the USDA did add 1 MMT to Ukrainian wheat exports. This reflects the fact that grain is moving via the Black Sea. Of course, wheat is still trading in a war time market. A single missile, bomb, or bullet could upend these projections.

 

Soybeans

Ending Stocks

The USDA estimates soybean ending stocks will be 220 million bushels which is below the average analyst estimate of 233 million bushels according to Bloomberg. The resulting stocks/use ratio is 4.98% compared to the rolling five-year average stocks/use ratio of 11.64%.

Supply

The USDA estimates soybean production will be 4.346 billion bushels, unchanged versus the prior month. Yield estimates also remained unchanged at were increased to 50.2 bushels per acre.

Demand

The USDA estimates total soybean usage of 4.414 billion bushels which exceeds the production estimate. This is the 3^rd consecutive crop year where usage is set to exceed production.

Global

The USDA estimates global soybean ending stocks will be 102.71 million metric tons (MMT) which is slightly above the average analyst estimate of 102.3 (MMT) according to Bloomberg.

Market Reaction

Soybean futures traded to the plus side of unchanged following the report. Still, they are only showing a slight gain on the day. Notably, after shrinking for two years in a row, global soybean ending stocks are expected to build this year while both corn and wheat ending stocks are expected to shrink.