The November 2022 World Agricultural Supply and Demand Estimates released this morning from USDA’s World Ag Outlook Board had few opportunities for bullish price momentum thanks to improved corn and soybean yield estimates.

Here are the key takeaways from today’s WASDE report:

Soybeans revert to bearish ways

Corn yields rise, but not as significantly as soybeans

Analyst comments: The 2022 U.S. corn and soybean crops are slightly bigger than the previous month’s estimates, but we can’t ignore that even the slight yield increases are well below trendline estimates and will keep some supply tightness in the markets that appear to have a stabilizing impact on prices – for now.

Corn, soybean 2022/23 ending stocks rise (bearish)

Analyst comments: I was surprised USDA did not adjust corn export volumes at all in this month’s report after the harvest time issues on the Mississippi River and the influence of a stronger dollar. But peak corn export season is not typically in the fall – it’s usually in late winter to late spring so perhaps USDA is just kicking that can down the road for now.

Soybean export volumes have rebounded in recent weeks, so I was less surprised that USDA forwent a cut to U.S. soybean exports this month. But USDA’s increases to domestic crush rates were even less surprising as current cash offerings at crush plants around the country continue to offer many farmers a premium harvest spot price above futures prices for freshly combined soybean supplies.

Soybean crush demand continues to grow and even amidst lackluster export prospects, the domestic market is offering plenty of profit opportunities to farmers.

USDA kept seasonal average prices for both corn and soybeans unchanged at $6.80/bushel and $14/bushel, respectively. This tells farmers that there weren’t a lot of significant changes to market dynamics that would justify a higher – or lower – price. In essence, it suggests there is a sturdy floor under current price levels, but more bullish market developments will be needed in the coming weeks to justify any sort of significant price rallies.

Argentina’s drought woes keep bullish hopes alive for soybeans

Analyst comments: USDA’s increases to 2022/23 global soybean ending stocks were largely derived from growing old crop stocks in China in this month’s WASDE report. The E.U. also imported more soybeans than previously realized in 2021/22, which was another contributing factor to larger 2022/23 ending stocks, despite the cuts to Argentina’s production.

Old crop soybean price increases likely reflected the drought situation in Argentina. But new crop prices fell based on dynamics in the larger global edible oils market – an uptick in winter rapeseed sowing in the Northern Hemisphere this fall will likely offset potential losses this fall for Northern Hemisphere soybean, sunflower, and cottonseed crops.

Lower global corn output

Analyst comments: The optimism for exports to Vietnam only holds if the dollar does not render U.S. corn unaffordable next spring and if a supposed global recession does not restrict Vietnam’s purchasing power in the coming year.

Old crop corn prices derived some bullish strength today from the tight global supply outlook for corn. USDA did not make any significant changes to South American corn estimates, suggesting that spring weather in the region is allowing for corn sowing to progress favorably.

But that is a key reason why new crop corn prices exhibited some weakness – if Brazil and Argentina are both able to harvest sizeable corn crops, that would go a long way in alleviating some of the supply tightness in the corn market, which would invariably be bearish for U.S. corn prices.

A bearish report for wheat

Analyst comments: This report could have been much worse for U.S. wheat supplies. While U.S. supplies tightened slightly from the previous month, global stocks increased on anticipated production gains from several other key players in the global wheat market.

One item that I found interesting in today’s report was the USDA expects food consumption of wheat in Indonesia and Bangladesh to be scaled back, which slowed global wheat food usage rates. This is another factor worth watching in the coming months – if a recession erodes the buying power of Southeast Asian countries, the world’s top exporters could endure smaller export volumes as a result.

On a brighter note, global wheat usage for livestock feed was revised higher this month thanks to high meat prices and increased consumption from the E.U., South Korea, the Philippines, and Vietnam.

The U.S. wheat market is likely to remain quiet until 2023 winter wheat sowings are reported in January 2023. Until that point, domestic pricing is likely to be dependent upon global dynamics.

Speaking of that, I noticed that USDA left Russia and Ukraine’s wheat production and export volumes unchanged. It wasn’t surprising considering the ongoing uncertainty surrounding the future of the “Black Sea Grain Initiative.”

But to that end, I predict that wheat prices will continue to fluctuate with each new news report that comes out of Russia and Ukraine with regard to the grain deal. I’m guessing any significant price changes will be rapid if recent history has been any indicator.