Market Movers: USDA Report Day March 31, 2023

Market Movers: USDA Report Day

Two USDA’s reports today, quarterly Grain Stocks and Prospective Plantings, give the trade a good deal of both old and new crop information to digest. Grain Stocks issues remaining old crop stocks as of March 1. This report is simply a count of left over stocks. USDA will incorporate a portion of today’s old crop surprises into the next monthly supply/demand report on 4/11 in the feed/residual category. Prospective Plantings is the survey based report that officially starts the new crop year. This report only holds intended planted acreage data. There are no estimates for percent harvested, new crop yields nor new crop demand. The trade will take these acreage numbers and apply them to USDA’s February AgForum demand estimates for a guide on how a USDA new crop balance sheet would look. USDA reported 72,900 producers were contacted for these two reports.

This is a tough time of year for grains. The old crop situation is nowhere near finalized and rumors/psychology hold just as much sway as known information. China’s recent corn buying, and rumored soybean buying, will be given a larger than needed emphasis. Additionally, the new crop situation will remain quite fluid for some time. There are three phases of new crop information to get through before the market accepts planted acreage estimates or the view of trend yields. Those three phases are USDA’s 3/31 planting estimates, planting itself then summer weather. The current view of delayed plantings means new crop markets can remain over implied economic value implied by a balance sheet for some time.

Corn:

2022/23: USDA counted 7.401 billion bushels for March 1 old crop corn stocks. This was under the 7.470 billion trade estimate (ALDL 7.558). This report was 69 million bushels under the trade estimate. As the trade has reliable data on December – February exports and corn for ethanol this implies stronger than expected feed/residual during the prior quarter. It would imply 1.423 billion in December – February feed/residual, -7.6% from last year. Combined with the September – November usage of -5.9% the trade would suggest USDA’s whole-year goal of -8.2% would be low. We would expect USDA to add 50 million bushels to their prior whole-year estimate of 5.250 billion for the April supply/demand report. The private trade would suggest higher feed/residual and no change in exports as long as China is buying. That would theoretically bring old crop stocks down from 1.342 billion to just under 1.3 and allow for pricing of 650 for futures. Allendale remains more concerned with old crop than the general trade. Even with China buying through this week they need an additional 1 – 2 million tonnes of further purchases to fix old crop exports. We have added 50 to our feed/residual estimate but still suggest export sales are behind by 50. Our current 1.342 billion implies 620 – 630.

2023/24: New crop intended plantings of 91.996 million were over the trade estimate of 90.880 (ALDL 90.414). This planned effort would be +3.4 million from last year. The new crop situation, using a normal balance sheet, remains quite bearish. Using USDA’s 2/23 AgForum 91.32% percent harvested and 181.5 trend yield would bring a crop of 16.614 billion. That is 1.458 billion over the 2022 harvest. The starting USDA AgForum ending stocks were bearish at 1.887 billion. With current old crop stocks and a larger acreage production would run 231 million over their 2/23 estimate. Ending stocks, with a moderate adjustment to demand, would come to 2.006 billion. But the trade is not ready to accept the new crop supply story. With North Dakota issues they have a risk premium place, perhaps up to 2 million acres. Additionally, much of the trade is not ready to accept trend yields for now. Whether 1.8 – 2.2 billion in new crop stocks, when the trade does accept this story the implied pricing is quite low, around $4.00 new crop futures.

Soybeans:

2022/23: USDA counted 1.685 billion bushels for March 1 old crop stocks. That was 57 million bushels under the 1.742 trade expectation (ALDL 1.737). For soybeans, with a small feed/residual category, the trade will also wonder if the 2022 harvest estimate will eventually be slightly lowered. For practical discussions on price it must be noted there was clear disagreement with the old crop balance sheet. Bulls have been hearing rumors of China buying perhaps 500,000 tonnes this week and another 500,000 next week to fill the hole from Argentina. The bull argument is we will have 37 million bushels of new export sales and now an increase of some sort for feed/residual. USDA’s prior 210 million bushel stock would imply 1380 futures with no premium for Argentina. A decline in stocks to near 150 would imply 1510 for price. In the short term, this is the trade’s belief. Allendale remains concerned about the old crop balance sheet. Eight weeks of poor sales have run -60% below average. Even if that improves up to -20% through August we’re short by 53 million. The China buying story is good psychologically but through last Thursday there are no export sales to report. There were no overnight export sales reported this week, mandatory for sales over 100,000 tonnes. There is also a sharp disagreement on how much China would buy from the US anyway. Brazil has a price advantage of over $60 per metric tonne. Allendale has added 20 million to the feed/residual category for now. We remain 25 million under USDA for exports though. Our stock is now 215 million and we remain concerned that will likely rise in the coming months. A stock of 250 would imply 1295 nearby futures.

2023/24: USDA’s 87.505 million acre estimate for 2023 soybean planting was under the 88.242 trade estimate (ALDL 87.768). This would imply a minimal net increase over 2022, +55,000. In the trade’s mind this will mean the trade will have to rally soybean prices to find needed acres ahead of planting. USDA’s 2/23 AgForum estimates were made with a similar planting of 87.5. Including a change to current old crop stocks and a small demand offset the implied stock of 283 would be bearish. Remember, stocks of 300 would imply around 1220 for new crop futures. But this is March/April and the trade still needs to see planting as well as summer weather (trend yields) before they accept the full supply transition story.

Wheat:

2022/23: USDA counted 946 million bushels for old crop stocks as of March 1. That was 12 million over the 934 trade estimate (ALDL 917). The wheat old crop marketing year ends on May 31 so there is limited time to correct this small discrepancy.

2023/24: USDA surprised the trade by reporting 49.855 million acres for all-wheat intended planting. That was even larger than their AgForum estimate of 49.5. The trade was looking for smaller numbers on this report, 48.852 (ALDL 48.706). This is bearish information but we hesitate to suggest the trade will price it in. There remains significant concern over both harvested acres and yields for hard red winter. Total winter wheat plantings were seen at 37.505, over the 36.256 estimate (36.524). Other spring was counted at 10.570 vs. the trade estimate of 10.950 (ALDL 10.607).This represents a net decline from last year of 265,000. Durum was seen at 1.780 vs. 1.666 estimated (ALDL 1.575). The trade has clear concern with spring wheat planting as North Dakota remains a clear problem.