Market Movers: USDA Report Day December 9, 2022

The December monthly USDA report is typically a quieter one for market impact. Production changes are reserved for next month. We are generally only seeing changes for US demand and world updates on this report. The next monthly report is due January 12. This includes production revisions to the completed 2022 harvest via the Annual Production Summary, implied September – November feed/residual usage via the quarterly Grain Stocks and the first estimate of fall winter wheat acreage via the Winter Wheat Seedings report. These changes, along with new demand adjustments, are rolled into the monthly WASDE report. Of note, though new crop wheat acreage is released on that separate report, USDA will not include any new crop numbers on the WASDE until May.

Corn:

2022/23: There were no changes to USDA’s corn production estimate. US ending stocks were raised from 1.182 billion last month to 1.257. This was over the 1.238 trade estimate (ALDL 1.258). The only demand change today was a 75 million bushel decline posted for whole-year exports, now at 2.075 billion. The prior two years of exports, phase one trade deal impacted, were at 2.471 and 2.747 respectively. Allendale notes current year to date export sales at -33% vs. the five year average. To hit USDA’s newly lowered goal, sales need to improve to +14% vs. the five year average through August. That still seems optimistic. We expect to see further revisions for exports and a decline in the corn for ethanol estimate next month. USDA’s 1.257 billion stock is now at Allendale’s 1.258 level. This would imply $6.60 futures. Given the expectation for further demand declines ahead the corn market is correct in trading a discount. A more severe price discount is being offset by concern for Argentina. January is the traditional start to their serious phase of pollination.

Though US corn stocks were moderately raised the net change for USDA‘s world sock was a decline from 300.8 million tonnes last month to 298.4. There were no changes to their Brazilian 126.0 mt or Argentine 55.0 corn production estimates. That is not a surprise in our view. Allendale does hold a light delayed planting based yield discount on our books but USDA will wait until January before making changes. Assuming a 10% cut, both late planting plus a little dryness in pollination, we are assuming a 5.5 mt production cut eventually (217 million bushels). USDA did note today declines for three producers. Ukraine was lowered by 4.5 mt to now 27.0, Russia was lowered by 1.0 to 14.0 and the EU was lowered by 0.6.

Soybeans: 

2022/23: There were no changes to US production on today’s report. There were also no changes to US ending stocks today from last month, still at 220 million bushels. The trade estimate was 238 (ALDL 220). We can see why many analysts were a little concerned with export sales but USDA likely felt this week’s overnight export sales on weekly numbers on Thursday were positive. The current 2.045 billion bushel whole-year export estimate would require remaining US sales through August to run -7% vs. the five year average. That seems doable given year to date sales at +7% and the recent four week average at +39%. Though we are running slightly under USDA’s expectation for +1.9% year/year domestic crush so far, we are not concerned. Crush rates should increase as the year progresses. With a stock estimate of 220 we would suggest an economic value future price of around $13.85. Current trades are now roughly $1 over that mark though. Unlike corn, this market does not have the baggage of a demand deficit. That means the full impact of Argentine concern can be traded. Additionally, some would suggest this week’s Chinese purchases would imply slightly better buying ahead. Bulls could also note their soybean imports June – November have run -14% from the prior year. Given a hog herd slightly over last year you could argue there is a need for replenishment and the US may benefit. Though we may suggest current prices do hold a little more premium than we expected it is not out of line as we head into Argentina’s main reproductive phase in February.

New crop world stocks were lightly raised, from 102.2 to 102.7 million tonnes. Typical for this time of year USDA left their Brazilian 152.0 mt and Argentine 49.5 estimates unchanged from last month. We expect declines for Argentine to be shown next month. There were no changes for China’s numbers on today’s report. Of note, USDA still sees a 98.0 mt import this year, up from 91.6 last year. With their low known imports for October and November the remaining of the year will need to run +11% vs. last year.

Wheat: 

2022/23: There were no changes to 2022 production, nor any demand numbers, today. Stocks were left unchanged at 571 million. The trade expected 576 (ALDL 588). We still have concern over their 775 million bushel export estimate. Year to date sales are -19% vs. the five year average. The recent four weeks have run -32%. To reach USDA’s goal the remainder of the year through May would need to improve to -10%. Current wheat pricing derived not from US balance sheet numbers but from psychology regarding perception of Ukraine exports and recent US Southern Plains rains.

World wheat ending stocks were slightly lowered, 267.8 million tonnes last month to 267. There were a few changes for competitors. Australia’s crop was raised 2.1 mt to now 36.6, in line with the Australian government’s forecast. Argentina saw a production decline of 3 mt to now 12.5 and Canada was lowered 1.2 to now 33.8. Though Ukraine’s production was not lowered today their exports were raised by 1.5 from last month.