December 9, 2022
USDA’s World Ag Outlook Board publishes its monthly World Agricultural Supply and Demand Estimates report on Friday morning. But unlike recent WASDE reports, this one has the potential to be less of a market-mover.
USDA will not be updating any acreage or yield estimates for 2022 corn and soybean crops, so the lack of supply-side revisions could make Friday’s report one of the quieter WASDE releases throughout the year.
But there are still plenty of demand-side revisions that could shake up ag commodity markets. Here is our team’s best guesses as to what the markets will be expecting ahead of Friday’s report.
As always, our team will be providing live coverage and analysis of Friday’s reports. Check out our website, www.FarmFutures.com, or follow us on our social platforms (www.twitter.com/farmfutures) for the latest insights. USDA releases the data at 11 am CST and our coverage will begin shortly thereafter!
Bearish sentiments are afoot for domestic corn stocks if trade estimates are to be believed. The average trade guess of 1.237 billion bushels in 2022/23 corn ending stocks would add 55 million bushels of corn back to ending stocks, which means usage cuts are likely in order tomorrow.
Where will these cuts come from for corn? It’s no secret that export paces have been abysmal for corn this fall. Tuesday’s U.S. Census Bureau data release of October 2022 ag export volumes saw corn shipments for the month fall 46% below year ago volumes due to issues on the Mississippi.
The shrinking livestock herd also represents a potential opportunity for USDA to cut corn usage rates on Friday. November 1 cattle on feed inventories are 2% lower than a year ago and placement volumes fell over 6% from a year ago in October 2022 as a tightened breeding herd slows expansion paces.
Average daily ethanol production through the week ending December 2 neared a one-year high on the heels of a busy Thanksgiving holiday season. On average, weekly corn consumption volumes for ethanol have mostly held steady to firmed slightly, leading me to believe that if USDA makes cuts to 2022/23 corn usage, it is more likely to come from the export and livestock feed/residual categories than ethanol.
Bearish pressures could also be in store for soybeans in tomorrow’s report, based on trade guesses. The average 2022/23 ending stocks estimate of 238 million bushels represents an 18-million-bushel increase in soybean ending stocks, which translates into downward usage revisions expected from USDA tomorrow.
The October 2022 soy crush topped 196.6 million bushels, making it the third largest monthly crush volume on record even though it was just a hair smaller than the October 2021 crush. Export revenues in October 2022 set new nominal price records, but marketing-year-to-date volumes still lag 6% behind year ago shipping paces.
I want to be skeptical of these demand cuts the trade is expecting for soybeans. We’ve seen some positive export news for U.S. soybeans this week that has fueled futures rallies. But the cash side tells a different story – basis remains weak at river terminals in the Midwest.
Processors continue to offer premiums for cash soybean sales, but weakness has crept into the market this week as many crush facilities have enough supplies on hand to meet production schedules. Plus, egg sets for poultry production are 0.2% lower than the same time last year over the past eight weeks – which is peak chicken prep season for all of those New Year’s diets from which we are all just a few weeks away.
An increase in domestic stocks for wheat is also expected, though based on the average trade guess, only about 5 million bushels of wheat will be added back to 2022/23 stocks via smaller usage rates. And it’s not a secret where USDA is going to make that upward revision – exports.
Peak wheat export season for the U.S. ended in September and volumes have fallen significantly since then. U.S. supplies continue to under compete against Russian and European supplies on the global market, especially as the dollar remains strong against other currencies.
Marketing-year-to-date U.S. wheat shipping volumes are 1% lower than the same time a year ago and as first quarter (July through August) wheat milling volumes soared to the largest volume (237M bu.) since USDA began tracking milling for food consumption in 2014.
South American corn and soybean production
With no new U.S. supply data expected in tomorrow’s report, all eyes will be on South American corn and soybean production, where peak planting season is quickly coming to a close. The trade is bracing for cuts to Argentina’s crops but potential increases for Brazil’s.
This is not surprising – USDA already cut Argentine soybean production last month as last year’s drought continues to plague the Pampas grains region. The dry weather has already taken a bite out of Argentina’s wheat crop, and we have already seen early signs of heat stress in the young soybean and corn crops in recent weeks as farmers continue to delay planting due to the drought.
Weather patterns have been more favorable in Brazil, which justifies the trade’s optimism for larger Brazilian corn and soybean crops. Planting is virtually finished for first crop corn and soybeans and spotty showers have helped offset warming temperatures.
But there is potential for drought worries as the summer sun heats up – and that prospect could prevent USDA from making any major revisions to Brazilian production in tomorrow’s report. More specifically, a USDA attaché report published early last week projects the 2022/23 Brazilian corn crop at 4.961 billion bushels, so it seems unlikely that corn production will be updated tomorrow.
Brazil’s food and statistics agency, Conab, released updated projections for 2022/23 soybean output this morning ahead of tomorrow’s WASDE reports. Conab’s soybean forecasts are now projected at 5.639 billion bushels, which is a 2.2-million-bushel reduction from its previous estimates.
USDA’s current forecast for 2022/23 Brazilian soybean production is currently at 5.584 billion bushels, though based on current weather prospects, it could revise that figure in tomorrow’s reports.
Conab also issued new corn production targets, projecting Brazil’s 2022/23 corn crop at 4.954 billion bushels, down 22 million bushels from its past forecast. USDA currently projects Brazil’s crop at 4.961 billion bushels – very similar to the latest Conab figures.
The market is expecting global ending stocks volumes to remain little changed in tomorrow’s WASDE report. Corn and soybean stocks are expected to increase slightly, which doesn’t offer much hope for a potential rally tomorrow.
But the biggest hope for bullish price action on Friday is likely to be in the wheat complex. Trade flows out of Russia and Ukraine will be significant factors to watch in the global wheat figures tomorrow. Further cuts to Argentina’s crop are also likely. If the average trade guess materializes, 2022/23 wheat stocks are expected to shrink by 15 million bushels. That’s not a lot, but it should help keep a floor under wheat prices until the next batch of market-moving news.
Read more about:WASDE
About the Author(s)
Grain market analyst, Farm Futures
Holland grew up on a dairy farm in northern Illinois. She obtained a B.S. in Finance and Agribusiness from Illinois State University where she was the president of the ISU chapter of the National Agri-Marketing Association. Holland earned an M.S. in Agricultural Economics from Purdue University where her research focused on large farm decision-making and precision crop technology. Before joining Farm Progress, Holland worked in the food manufacturing industry as a financial and operational analyst at Pilgrim's and Leprino Foods. She brings strong knowledge of large agribusiness management to weekly, monthly and daily market reports. In her free time, Holland enjoys competing in triathlons as well as hiking and cooking with her husband, Chris. She resides in the Fort Collins, CO area.
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