USDA’s latest world agricultural supply and demand

Wheat futures inched up following USDA’s latest World Agricultural Supply and Demand Estimates report released this morning.

Soybean futures continued edging back from 10-year highs after USDA found extra soybean bushels in 2021/22 South American production forecasts. Corn prices reversed pre-report losses and inched $0.01-$0.02/bushel higher on smaller Ukrainian and Chinese corn crops immediately following its release.

“The only thing surprising about the June 2022 WASDE was how few surprises there were in this month’s report,” notes Farm Futures grain market analyst Jacqueline Holland.

Corn

USDA’s outlook for corn includes assumptions of “larger beginning stocks, slightly higher use and increased ending stocks,” according to the June report. Beginning stocks increased by 45 million bushels, which is mostly due to a decline in exports this marketing year. Export expectations were lowered 50 million bushels, while food, seed and industrial use trended 5 million bushels higher.

Domestic ending stocks for 2021/22 increased to 1.485 billion bushels, and 2022/23 ending stocks also moved higher, reaching 1.400 billion bushels. Analysts expected to see a modest decline for both numbers.

“Lower 2021/22 U.S. corn exports will help grow 2022/23 stocks. USDA refrained from making major changes to 2022/23 domestic corn usage rates which is likely a reflection of the tight stocks and eager consumption rates,” Holland says.

Globally, world ending stocks firmed to 12.241 billion bushels for 2021/22, versus the average trade guess of 12.148 billion bushels. World ending stocks for 2022/23 also trended higher, reaching 12.222 billion bushels, versus the average trade guess of 12.012 billion bushels.

Holland says USDA was increasingly more optimistic about planting progress in Ukraine. USDA increased 2022/23 Ukrainian production estimates by 217 million bushels from last month’s report, now forecasting the embattled country’s corn crop this year at 984 million bushels.

“Earlier this spring, the overarching market consensus was the Ukrainian farmers would produce 50%-55% fewer corn bushels this spring,” she says. “Now, USDA expects a 41% smaller 2022 Ukrainian corn crop relative to last year.”

But Holland adds that the optimism only went so far.

“USDA did not adjust either of Ukraine’s 2021/22 or 2022/23 corn export forecasts. Recent negotiations and mediation efforts from Turkey and the U.N. between Russia and Ukraine have yet to yield a solution that will allow for free and clear transport of Ukrainian grain through the Black Sea,” she says. “This signals that the Black Sea conflict is going to continue to be a slow grind and will likely have devastating impacts for countries susceptible to famine this year, particularly in the Horn of Africa.”

In South America, USDA left corn production estimates steady from May, with Brazilian production estimated at 4.567 billion bushels and Argentine production at 2.087 billion bushels.

The season-average farm price for producers held steady, at $6.75 per bushel.

Soybeans

USDA’s outlook for soybeans saw lower beginning and ending stocks, plus higher prices. The agency raised its soybean export estimates by 30 million bushels to 2.17 billion, “reflecting strong export sales and a reduced export forecast for Brazil.” That meant 2022/23 ending stocks fell 30 million bushels to 280 million, versus an average trade guess of 307 million.

“More U.S. soybean exports for the 2021/22 season tightened 2022/23 U.S. soybean stocks. It will also result in 2021/22 ending soybean stocks in the U.S. shrinking to the 6th tightest volume on record,” Holland says. “But similar to corn, the strong usage rates are not likely to abate in the new marketing year, especially if prospects hold firm for a record-breaking U.S. soybean crop this year.”

Holland doesn’t think the market received enough bullish information from today’s report to justify prices running back to the 10-year high matched in the markets yesterday, however.

“I think the hope for any new rallies in the coming weeks will solely depend on new export sales announced by USDA and a continuation of strong domestic usage rates,” she says.

World ending stocks for 2021/22 moved higher, in contrast, shifting from 3.132 billion bushels in May up to 3.165 million bushels this month. World ending stocks for 2022/23 also firmed from 3.659 billion bushels in May to 3.691 billion bushels in June.

South American production estimates for 2021/22 firmed. Brazilian production increased to 4.629 billion bushels, while Argentine production increased to 1.595 billion bushels.

The season-average farm price for producers improved 30 cents above May estimates, reaching $14.70 per bushel.

Wheat

USDA’s outlook for wheat includes a trend of increased supplies, steady domestic use, unchanged exports and higher stocks. Supplies firmed 8 million bushels from a month ago, reaching 1.737 billion bushels. In contrast, analysts were expecting to see a modest reduction, with an average trade guess of 1.713 billion bushels. 2022/23 ending stocks also moved 8 million bushels higher to reach 627 million bushels. The agency notes that this is still 4% lower from year-ago levels.

“The smaller hard red winter wheat crop was not much of a surprise, especially after seeing subpar yields across Kansas during last month’s Wheat Quality Council tour across the state,” Holland says. “Top wheat grower Kansas is already expected to have a 25% decrease in winter wheat yields this year, dropping down to 39.0 bushels per acre.”

But conditions in the eastern Corn Belt and Pacific Northwest have been more favorable to soft red winter and white wheat crops in those locations, Holland adds.

“Record yields expected for soft red winter wheat crops in Missouri and Tennessee are likely to boost 2022 soft red winter wheat production beyond last month’s estimates,” she also notes.

World ending stocks for 2021/22 slid slightly lower to 10.265 billion bushels. World ending stocks for 2022/23 saw a fractional decline to 9.804 billion bushels.

“Globally, wheat was the star of this month’s WASDE report,” Holland says. “USDA increased Russian wheat production and export forecasts as favorable weather for winter wheat crop development is likely to produce the country’s largest crop since the fall of the Soviet Union. Middle East buyers are also forecast to increase 2022/23 wheat purchases by 13 million bushels to 857 million bushels. The Middle East follows Northern Africa as the world’s second largest wheat importing region.”

What’s unfolding in India is also worth some commentary, Holland adds.

“India’s 2021/22 wheat exports were also cut 4.4 million bushels after the government imposed an export ban in mid-May amid concerns about domestic availability following the ongoing drought,” she says. “India is still expected to set a new record high for exports in 2021/22 at 295 million bushels. India having reduced wheat supplies will force more importers to look further away for affordable wheat supplies. It’s a dynamic that will likely keep wheat prices high, especially while Russian importers try to circumnavigate sanctions and Ukrainian supplies remain trapped within the country.”

USDA projects the season-average farm price at $10.75 per bushel, which is unchanged from May.