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May WASDE report throws 2 unexpected curveballsMay WASDE report throws 2 unexpected curveballs

Brazil’s CONAB corn production estimate changes also shake up markets on Thursday.

Brian Splitt

May 12, 2022

4 Min Read
field of young corn

USDA broke character in today’s release of the first new crop corn balance sheet for 2022/23. Since 2014, the agency has used the trend yield shown in the February Ag Outlook Forum as the May World Agricultural Supply and Demand Estimates report yield estimate. 

Even during the massive flooding across the Midwest in 2019, USDA maintained their trend yield assumption for the May WASDE report. Today’s report used 177 bushels per acre, which is 4 bpa less than the 181 used in this year’s Outlook Forum.

To accommodate the reduction in production due to lower-than-expected yield, USDA lowered both year-over-year corn demand for ethanol and feed/residual by 100 million bushels and 275 mb respectively.

Old crop corn stocks were left unchanged versus expectations of a 30 mb reduction which also helped buffer the new crop balance sheet. This puts 2022/23 stocks-to-use at 9.3% versus 9.6% for 2021/22.

Related: May WASDE feeds wheat bulls

Brazil plays with new crop corn production

Another surprise today came from an on-the-fly change to CONAB’s website after their report release this morning. Early in the day when CONAB released their own assessment of Brazil’s corn and soybean crops, they raised their outlook for the corn crop from 115.6 Million Metric Tonnes to 116.2 MMT based on an increase to second crop production. This is counter to recent narrative due to dry conditions in Brazil which most thought would reduce their Safrinha crop.

Because of this change to the crop estimate, CONAB increased their estimate of Brazilian corn exports. Late in the afternoon, CONAB’s site updated and dropped the crop estimate to 114.58 MMT, a reduction of 1.62 MMT, or roughly 64 mb.

This revision was made after the market close, and some might not even know yet. It will likely boost corn futures on the open. Now there are reports of frost risk in southern Brazil next week with harvest starting in June.

Wheat surprises

What should be considered the biggest miss of the report is the production estimate of Hard Red Winter Wheat. Pre-report estimates from the trade were looking for a 685 mb crop, while USDA showed production of 590 mb.

A 95 mb miss is a nearly 14% miss, and at current stocks levels, was enough to send all wheat classes to their respective daily price limits. Both Hard Red Winter and Hard Red Spring Wheat made new contract highs on this news.

Technically, corn is still respecting its upward trend. I would consider December corn to be in an ascending triangle formation which is generally considered a bullish consolidation formation with new contract highs expected.


December Corn

Hard Red Winter wheat broke out of a consolidative wedge recently and closed into new contract highs.  


July Hard Red Winter Wheat

If you would any assistance in protecting the value of your crop, as always, feel free to contact me directly at 815-665-0463 or anyone on the AgMarket.Net team at 844-4AGMRKT. We are here to help.

Reach Brian Splitt at 815-665-0463 or [email protected].

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through ADMIS in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading information and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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About the Author(s)

Brian Splitt

Technical analyst, AgMarket.Net

Brian began his career in the financial services industry with expertise in insurance products, stocks, bonds, mutual funds and annuities. Brian studied technical analysis and migrated to commodities where he has built a successful career. As a technical analyst with AgMarket.Net, he utilizes prior price or volume action or trends to predict future price moves and break down agricultural balance sheets. Brian is a decorated combat veteran of Operation Iraqi Freedom as well as a member of a Gold Star Family.

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