August 12th, 2022
The August 12 monthly USDA report holds changes to crop demand, adjustments to new crop production and to new crop demand. This report is special as it starts a more intensive yield measurement estimate than May through July. The August report is derived from a nationwide farmer survey conducted July 25 – August 8 for general estimates as of August 1. This month’s report included reports from 15,400 producers of all crops.
2021/22: USDA raised its view of August 31 old crop ending stocks from 1.510 billion to 1.530. This was just over the 1.512 trade estimate (ALDL 1.522). Corn for ethanol was lowered by 25 million which was reasonable given prior weeks of light consumer push-back. That was lightly offset by a 5 million increase for non-ethanol industrial. Exports were left unchanged this month. That could be raised by a light 10 million in future reports.
2022/23: USDA’s acreage re-survey effort helped them lower planted acreage by a light 100,000 acres. Harvested was lowered by 100,000 as well. Some may suggest, based on anecdotal Western Cornbelt reports, that may be lowered lightly in the months ahead. USDA’s yield decline, from 177.0 to 175.4 bpa was quite close to the 175.9 analyst estimate (ALDL 176.3). This is now -3.1% from the starting trend of 181.0. We see this as a reasonable estimate for this month. That number will change on the coming September and October reports. Our own weather modeling suggests it could fall to 174.8 after August weather is factored in. New crop production was lowered by 146 million bushels, now 14.359 billion. The trade expected 14.392 (ALDL 14.410). Lowered supply normally has some type of demand offset. For this report USDA lowered feed/residual by 25 million bushels and exports by 25. We have no real problems with either of those moves. New crop US corn export sales are only 13.2% of USDA’s prior new crop goal. That is under the five year average pace of 16.1% pre-sold by this point. Ending stocks, lowered from 1.470 billion to 1.388, were quite close to the 1.402 trade estimate (ALDL 1.399). This stock level would imply a 610 price level for December corn. With our view of lightly lowered yields ahead we can justify 630 for a reasonable market price.
New crop world stocks were lowered from 312.9 to 306.7. Production was raised for Ukraine (+5 mt) and Russia (+0.5). USDA dropped 8 mt from its EU estimate, now at 60. No changes were made to China’s new crop estimates.
2021/22: Old crop stocks were raised this month from 215 to now 225 million bushels. That was next to the 226 trade estimate (ALDL 229). Exports were lowered by 10 million bushels. This is reasonable. Domestic demand was not changed on this report. We will note estimates for Monday’s NOPA crush report are better than expected. This category could be raised next month.
2022/23: Planted and harvested acreage was lowered by 300,000 on this report. The farmer survey found strong yields, 51.5 trend was last month’s figure, now 51.9 bpa. Though we, and much of the trade, will question this number, it is not out of line for USDA in recent years on the August report. The trade estimate was 51.5 (ALDL 51.35). New crop production was raised by 26 million bushels to 4.531. The trade was expecting 4.481 (ALDL 4.496). Exports were raised as a partial supply offset, 20 million bushels. That is reasonable given so-far, strong new crop bookings. USDA’s ending stock estimate was therefore raised from 230 million to 245. The trade was at 230 (ALDL 211). At face value, today’s bearish soybean numbers would imply November soybeans would be correctly priced at 1300. We suggest the trade will hold a bit of skepticism and would keep pricing limited to 1400, 200 million bushel stock equivalent, until higher confidence of yields is reached. Currently, we expect eventual yields down to 50.0 bpa which would suggest a futures price of 1420. Soybeans went into today’s report too optimistic.
New crop world stocks were raised from 99.6 to 101.4 million tonnes. Chinese production was raised slightly while EU’s crop was lowered slightly. Important for us, there was no change in USDA’s view of Chinese imports. They have 90.0 for old crop and 98 for new. As of this morning, China’s own government has 91 for old and 95 for new.
2022/23: A slight 100,000 acre reduction in wheat plantings was noted on today’s report. That was offset by a small yield increase to 47.5. The net result was a minimal 2 million bushel increase for all-wheat US production at 1.783. The trade was at 1.791 (ALDL 1.788). Other spring production was raised by 9 million to 512. New crop supply changes were quite reasonable. However, the 25 million increase for exports and 6 for food use was interesting. USDA’s prior export estimate would require the remaining year sales to run -16% from the five year average. Over the past four weeks sales have run -19%. New crop stocks were lowered from 639 million to 610. The trade expected 650 (ALDL 643). We would argue 775 on the low end for Chicago and 900 for reasonable upside. Of note, wheat prices have been more drawn to psychological pricing in recent weeks than balance sheets. This current US ending stock estimate would be the tightest in nine years.
World wheat ending stocks were lowered from 267.5 to 267.3. Russian production was raised by 6.5 mt on this report, more is coming ahead. Australia was raised by 3, China by 3 and Canada by 1. India was lowered by 3. Exports were a focus with Ukraine only upped by 1 mt.