Market Movers: USDA Report Day
The October monthly USDA report starts with a revised view of old crop corn and soybean ending stocks as well 2022 wheat production from the two September 30 reports. It also includes new production views for corn and soybeans and demand changes for all three. This specific corn and soybean production estimate relies more heavily on in-field yield analysis than in September. For the farm survey portion of yield determination, 8,200 producers of varying crops participated from September 24 – October 5.
2022/23: Old crop stocks as of August 31 were lowered 148 million as previously reported on the September 30 Grain Stocks report. The trade focus today was new crop production and demand changes. For this report USDA lowered US production by 49 million bushels to 13.895 billion. That was next to the 13.885 trade estimate (ALDL 13.937). There were no changes in planted or harvested acreage on this report. USDA choose to incorporate the farm program acreage data last month. Yields were lowered from 172.5 to now 171.9. That was next to the 171.8 trade estimate (ALDL 172.4). Though production was quite close to the trade estimate USDA gave us a surprise with a 25 million bushel increase for imports to now 50. That is the largest import estimate in six years. Between lower beginning stocks, lower production and higher imports total supply fell 172 million from last month. USDA’s current total supply estimate is the lowest in nine years.
Lowered demand was recognized on this report. USDA’s view of corn for ethanol for this September – August marketing year was lowered by 50 million bushels to now 5.275. Their current estimate fell from -1.0% vs. the last normal driving season, 2018/19, to now -1.9%. There could be more cuts ahead given known gasoline usage declines in the old crop year and into the first month of the new year. A sharp 125 million bushel decline was also noted for USDA’s export view. Though more than we expected to see on this report, it is reasonable. The prior four weeks of US corn export sales have been terrible at -61 vs. the five year average. There is likely more cuts ahead as it would take a rebound to +6% now through August to meet USDA’s newly lowered hope. Though we are not in the heart of corn shipment season, the problems along the Mississippi, of which there is no forecast for improvement, are concerning. The Gulf is responsible for 61% of US shipments. One positive for today’s demand changes was a 50 million increase for feed/residual. This reflects the better than expected June – August pace realized on September 30. Ending stocks were lowered from 1.219 billion to now 1.172. That was over the trade expectation of 1.124 (ALDL 1.166). The current stocks/use estimate, 8.3%, would be tied for the second lowest in 10 years. These prices would imply $6.85 for futures. While corn is at economic value currently, we expect demand declines in future reports and eventually lower prices.
New crop world stocks were lowered from 304.5 to 301.2 million tonnes. There were no changes for the spring 2023 harvest estimates for Argentina and Brazil. Ukraine’s current harvest was not adjusted on this report. Only EU’s decline was recognized, 58.8 last month to now 56.2. Separate from the small decline for beginning stocks, China’s new crop numbers were left unchanged.
2022/23: Beginning stocks were raised by 24 million bushels on this report in accordance with September 30 Grain Stocks. New crop production was a surprise with a 65 million bushel decrease from last month to now 4.313 billion. That was over the trade estimate of 4.378 (ALDL 4.410). There were no acreage adjustments as USDA incorporated farm program data last month. Yields were lowered from 50.5 to 49.8. That was on the lowest analyst estimate of the group. The trade estimate was 50.6 (ALDL 50.9). USDA’s total supply estimate was lowered by 31 million.
Soybean demand is a mixed bag. Everyone agrees with the view of firm domestic crush given new plants coming online this year and next. USDA reflected that with a 10 million increase in their estimate today. The focus really was on exports. USDA cut their prior view by 40 million bushels now at 2.045 billion. The prior four weeks of US sales were poor at -54% vs. the five year average. To hit USDA’s newly lowered whole-year hope remaining sales now through August need to improve to -2% vs. average. That would normally be easy to do but current Mississippi conditions are a concern. This is the peak shipping season for soybeans and all river forecasts suggest a worsening of conditions. The US Gulf is responsible for 52% or our shipments. As with corn, we would warn of potential further export declines ahead. With lowered total supply and lowered total demand ending stocks were left unchanged at 200 million from last month. The trade expected an increase to 248 (ALDL 254). This stock estimate would imply $14.00 for futures.
New crop world stocks were raised from 98.9 to 100.5 million tonnes. No changes were made to Argentina’s coming spring harvest. Brazil was raised by 3 to now 152. On the China front USDA raised their import estimate by 1 to now 98.
2022/23: The incorporation of the September 30 Grain Stocks and Small Grains Summary reports took 124 million off total supply. USDA today added a small 10 million to their import estimate resulting in a net 114 million decline in total supply. USDA’s 50 million cut to exports on this report was reasonable with recent sales -44% vs. the five year average. We have a small concern that this newly lowered number is a little too high. Remaining sales through May would need to improve to -17% vs. normal. Another hit to demand came from the 30 million cut for feed/residual use. The trade learned on September 30 that the June – August miscellaneous use was quite poor. The net result of these changes was a stock revision from 610 million last month to now 576. The trade estimate was 554 (ALDL 606). This new USDA estimate would imply 925 for Chicago futures. As a reminder, current pricing has a heavy reliance on psychological factors rather than balance sheets.
World wheat ending stocks were lowered from 268.6 to 267.5. Argentine production was lowered by 1.5 while Brazil was raised by 0.5. Confusingly, Ukraine was left unchanged at 20.5. Their ag ministry estimated the completed crop at 19.2. Also of interest, Russa was left at 91.0. Most other sources are 8 – 10 over this.