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May WASDE feeds wheat bulls

Getty/iStockphoto winter wheat field
U.S. winter wheat shortfall more severe than previously believed.

A smaller than expected U.S. wheat crop for 2022 and higher than expected 2022/23 U.S. wheat usage were among the most significant market movers in today’s World Agricultural Supply and Demand Estimates report. New crop corn prices also rallied on shrinking global production estimates amid high input costs, uncertain fertilizer availability and competitive prices for alternative crops.

“USDA surprised markets by simply recycling the 2021 corn yield of 177.0 bushels per acre for the 2022 yield estimate,” notes Farm Futures grain market analyst Jacqueline Holland. “Most market watchers anticipated USDA’s World Agricultural Outlook Board, the organization responsible for creating the WASDE estimates, would use the trendline yield of 181.0 bpa published at the February 2022 USDA Ag Outlook Forum.”

Before digging into the numbers, it’s also worth mentioning USDA’s special note it included at the top of the May report: “Russia’s recent military invasion of Ukraine significantly increased the uncertainty of agricultural supply and demand conditions in the region and globally. The May WASDE represents an ongoing assessment of the short-term impacts as a result of this action.”

Corn

USDA provided an initial production estimate of 14.5 million bushels for the 2022 corn crop, which would be 4.3% below last year’s effort, if realized. Average yields are projected at 177.0 bushels per acre, which USDA revised 4.0 bpa lower from its Agricultural Outlook Forum in February.

Per USDA: “The very slow start to this year’s planting in the major corn producing states and the likelihood that progress by mid-May will remain well behind normal reduce yield prospects.”

Per Holland: “The total corn production value for 2022 came in at the low end of analyst expectations, which created some bullish price pressure in the new crop corn futures complex following the report’s release. WAOB’s corn usage estimates for the 2022/23 season are smaller as a result of the lower yields, with significant cuts to feed and export usage categories.”

On the other side of the ledger, USDA expects total U.S. corn use to fall 2.5% in 2022/23 based on declines in both domestic use and exports. The agency held food, seed and industrial use steady, at 6.8 billion bushels. Corn used for ethanol is also expected to hold steady from a year ago. Corn feed and residual use slid 4.9% lower, with corn exports falling 4% below year-ago totals.

Corn ending stocks are down 80 million bushels from last year, and stocks relative to use is 9.3% versus the prior five-year average of 14.4%. The season-average price for farmers is now estimated at $6.75 per bushel – the highest since climbing to $6.89 at one point in the 2012/13 season.

Global corn usage is expected to decline 1.2%, with imports down 2.3% amid declines in China, Canada, the European Union and Brazil. Global ending stocks are also down 1.4%, to 12.011 billion bushels.

Soybeans

USDA’s latest assessment for 2022/23 U.S. soybeans is “higher supplies, crush, exports and ending stocks” compared to a year ago. The agency forecasts this year’s crop at 4.64 billion bushels due to a higher harvested area. That would be 5% bigger than last season’s crop, if realized.

“Soybean production in 2022 is expected to blow all previous crops out of the water in terms of volume,” Holland says. “It will surpass last year’s record large crop (4.44B bu.) and is expected to grow to 4.64 billion bushels this fall, weather permitting.”

The 2022/23 soybean crush is expected to reach 2.26 billion bushels, which is 40 million above the prior year’s total. Exports could improve 60 million bushels from a year ago to reach 2.2 billion bushels. All told, ending stocks could rise 75 million bushels to 310 million bushels this coming marketing year.

The season-average farm price is forecast at $14.40 per bushel, versus $13.25 last season.

Global oilseed production should trend higher in 2022/23 as USDA expects improvements to the Brazilian soybean and Canadian canola crops. Worldwide soybean production could reach 14.503 billion bushels – a more than 10% bump from a year ago.

Wheat

USDA’s wheat outlook shows “reduced supplies, exports, domestic use stocks, and higher prices.” All-wheat production in the U.S. is expected to increase 83 million bushels to reach 1.729 billion bushels. Average yields are forecast at 46.6 bushels per acre, a 2.3 bpa increase from a year ago.

Even so, challenges abound, and winter wheat production is expected to decline this season.

“The drought in the Plains and Pacific Northwest continues to degrade crop quality and will likely lead to more significant shortfalls than previously believed,” Holland says. “2022 wheat yields are expected to fall below trendline for the first time since 2018.”

Losses have been so significant that Idaho, who previously was never ranked higher than the country’s fifth largest wheat producer, is now on track to produce the country’s fourth largest winter wheat crop by state this year, Holland adds. And Texas is likely to see the largest number of non-harvested acres (4.2M ac.) on record due to the current drought stress.

“At 1.17 billion bushels, winter wheat production forecasts are a staggering 8% lower than a year ago,” Holland says. “My redneck math found that USDA is more optimistic about spring wheat production this year, despite lack of official data and planting progress. But I am cautious about saying that the spring wheat outlook is optimistic because of planting struggles and a lower-than-expected annual acreage increase for spring wheat acres.”

The season-average farm price is a blistering $10.75 per bushel – the highest on record and $3.05 better than last year.

High prices may create challenges in the export market, however. Export sales are only projected to reach 775 million bushels in 2022/23, which would be the lowest total since 1971/72 if realized. Ending stocks are still tightening, meantime, falling another 6% to 619 million bushels – the lowest level in almost a decade.

Global production could face a modest decline, to 28.469 billion bushels. USDA expects to see reduced production in Ukraine, Australia and Morocco partially offset by increases in the United States, Canada and Russia.

Global trade of wheat could re-write the record books if it reaches USDA’s estimate of 7.529 billion bushels.

US 2022-23 Corn and Soybean production

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