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October 2022 WASDE insights

The USDA report was bullish on corn, soybeans and wheat despite what you might hear.

Bill Biedermann

October 12, 2022

6 Min Read
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Corn end stocks are 1.172 billion bushels vs. 1.219 last month and 1.377 last year. That generates an 8.28 percent stocks to use ratio. To put that in relatable terms: If something really bad happened next year, we only have a 31.1-day supply of corn in the bin. YIKES.

With dry weather in Argentina and a short available supply of fertilizer around the world that could affect yield, it would not take much of a threat to cause people to run to the store and stock up a little ‘just in case.’  And LITTLE is the key word because the 8.2 percent stocks to use ratio is the lowest since the 2011-2012 and 1995. Additionally, based on USDA quarterly stocks reports, pipeline requirements to keep the agricultural industry running smoothly is 1.2-billion-bushel carryover. Anything below that implies that if supply tightens somehow, demand also has to tighten by an equal amount. World stocks of corn were estimated at 301 million metric tons. Mostly due to the drop in U.S. production. The last time stocks were below 300 million bushels was in 2020-21.


Soybean stocks came in unchanged at 200 million bushels. That was a surprise because the quarterly stocks report added 35 million bushels to old-crop carry over and most expected yield to come in a smidge higher. But USDA lowered yield which more than offset the larger Q stocks and then lowered demand by 30 million bushels to balance it all out and keep stocks unchanged. Stocks to use ratio is at 4.5 percent represents a 16.5-day supply.

Obviously, that is dangerously tight and has only been worse in 2003, 2008, and 2012-2014. This basically means that if there is reason to make world demand shift to the U.S. or if the U.S. supply were to shrink, there could be a price battle for buyers to compete for a 16-day excess supply, while sellers can afford to be choosy.

When we look at the world, we are being warned by USDA that the world is expecting a large 8-mmt increase in stocks by the end of next year based on the assumption that South America will produce a record crop. Thus, it is important to note that USDA is hinting that prices could trend lower next year if we see the record production cycle materialize. That means price protection is advisable at $14 and profit margins need to be protected by U.S. farmers. However, with only a 16-day supply, it is a no brainer to keep the upside open by building that functionality into your marketing plan. 


Wheat stocks are also tight. We have not been down to 576-million-bushel stocks since 2007. So, in today’s world environment, and the growing drought in the U.S., it becomes a concern for any procurement officer to make sure his company has adequate price protection or inventory on hand in case the drought continues or the Russians do another stupid thing. 

Economic perspective

All in all, from purely an economic perspective of today’s numbers, this was a BULLISH report. Now let’s talk about what is driving prices today. Fiscal policy is designed to dis-inflate prices, which will create some pain by slowing demand which should result in a build of inventory, lowering of product prices and inevitably fewer job openings and possibly layoffs. The U.S, can afford that but for a developing nation or even parts of Europe where a large sector depends on government income subsidies and 0% interest business operating budgets, higher rates could cause illiquidity at the bank level as performance on bonds threaten default.

This threat has become so elevated that a special meeting of the IMF and World Bank officials took place in Washington yesterday. The UN has also piped in and warned of a negative result if central banks remain hawkish. Here is the dilemma: If central banks remain strong and enforce the policy needed to reduce inflation down to where cost of living remains in line with earnings, the economies face pain and social discomfort or even fear of illiquidity and social unrest. However, if they back away, inflation could remain at accelerated pace and exceed the rate of earnings which results in fiscal strain on households and eventual social discomfort and even unrest. Throw in another drought, and now you are talking about something no one can control. If food supplies are this tight and there is an inflation-supportive central bank policy, and a drought, all I can say is “momma will do anything to make sure her babies are fed.”

Keep your marketing plan balanced. Make SURE you are securing the profit margins you have on both 2022 and next year's 2023 crop. But also make sure you are using tools that keep your upside open.

A message for farmers

Betsy Jibben, media director of AgMarket Consulting, interviews Chris Hawthorn, head of the field crops section of USDA's NASS Department. They discuss the October Crop Production report, and how USDA's NASS division uses objective yield data and farmer surveys. Watch the complete interview: 

Reach Bill Biedermann at 815-893-7443 or [email protected].

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

About the Author(s)

Bill Biedermann

Hedging strategist, AgMarket.Net

Bill is a well-known speaker, presenter and commodities advisor. In addition to trading commodities for 40 years he has testified before Congressional hearings, CFTC hearings, served for the U.S. State Department AID and co-founded one of the largest IB Brokerage and Agricultural Economic Research firms in the U.S. Bill graduated from Illinois State University with majors in Agricultural Production, Ag Economics and Ag Education and farmed from 1973-1988.

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