The November monthly USDA report starts with a revised view of old crop corn and soybean ending stocks. USDA can change the completed wheat harvest but usually leaves that category unchanged. Demand changes are seen for all three crops. For the farm survey portion of yield determination, 6,100 producers of varying crops participated from October 25 – November 4.
2022/23: US production was raised by 35 million bushels to 13.930 billion. The trade estimate was 13.887 (ALDL 13.881). Yields were raised by 0.4 bpa to 172.3 vs. the trade estimate of no change at 171.9 (ALDL 171.7). There is no real argument about the production change. The bigger issue was that USDA chose to lay off on realistic demand changes. Feed/residual, which is correlated to corn supply changes rather than livestock numbers, was raised by 25. But USDA chose to ignore the big problem with demand, exports. In our view the size of the current discrepancy between this year’s pace and USDA’s whole-year hopes is too much to ignore. Year to date sales are -39% from the five year average and recent sales are even worse at -71% vs. average. Sales need to sharply increase to +16% vs. average to meet their current hope. If remaining sales improve to only -25% vs. normal through August we’ll miss USDA’s hope by 539 million bushels. If they improve to even with last year through August, perhaps a realistic hope, the miss will total 209 million. USDA also left their corn for ethanol projection unchanged today. We have had five weeks of terrible ethanol production numbers and four weeks of good ones. The year to date figure is -6.8% vs. the last normal driving season, 2018/19. USDA’s current corn for ethanol hope is -1.9% from that year. Ending stocks this morning were raised minimally, from 1.172 billion to 1.182. The trade estimate was 1.207 (ALDL 1.258). Though today’s report would appear to be good news at first glance the trade realizes USDA cannot ignore the demand argument forever. USDA’s numbers would still imply $6.85 for futures while our view would suggest $6.60. Unless corn exports change significantly bears could argue for more serious price declines. Bulls are correct to counter, for now, that Argentina’s January to mid-February yield determination is a partial psychological offset.
New crop world stocks were lowered from 301.2 million tonnes to 300.8. Declines were noted for the European Union again as well as South Africa. China’s new crop numbers were left unchanged.
2022/23: Production was raised by 33 million bushels on today’s report to now 4.346 billion. The trade expected 4.315 (ALDL 1.313). Yields were upped by 0.4 bpa to 50.2. Though this was over the 49.8 trade estimate (ALDL 49.8) this is a reasonable minor change. Domestic crush was raised by 10 million and residual use by 2. There was no surprise with USDA’s decision to keep exports unchanged. Year to date sales are +5% vs. average. They need to run -1% from average through August to hit USDA’s goal. That is just fine for now. Ending stocks were therefore raised from 200 million to now 220. That was just over the 212 trade estimate (ALDL 207). Numbers just over 200 million would imply futures around $13.85. This market is holding a bit of psychological premium at this time. We expect that to continue until we get closer to Brazil’s yield determination period in January.
New crop world stocks were raised from 100.5 to 102.2 million tonnes. Delayed soybean planting and the current moisture profile encouraged them to lower Argentina by 1.5 mt to now 49.5. There were no changes for estimates of China.
2022/23: USDA has changed wheat production in seven of the prior 20 November reports. On this one they left it unchanged at 1.650 billion. Food use was raised by 7 million while seed was lowered by 2. They did not adjust exports on this report. Year to date sales are -18% from the five year average. The prior four weeks are worse at -30%. We are a little skeptical of their current estimate as it would take the remaining months of the year to improve to -16%. Ending stocks were actually lowered on this report, from 576 to 571 million. The trade expected 578 (ALDL 592). USDA’s estimate would imply 925 for Chicago futures. As a reminder, current pricing has a heavy reliance on psychological factors rather than balance sheets. We would also note there is a growing disparity between the bearish Chicago contract and neutral Kansas City.
World wheat ending stocks were raised minimally, from 267.5 to 267.8 million tonnes. Increases were noted for Australia. Despite excess moisture concerns they were raised by 1.5 mt. Other increases were noted for Kazakhstan and the UK. The trade would certainly agree with their 2 mt decline for Argentina to now 15.5 due to dryness.