USDA Report Day July 12, 2022
The July 12 monthly USDA report holds changes to crop demand, adjustments to new crop production and to new crop demand. New crop production typically only sees an acreage adjustment on this report matching the 6/30 Acreage.
Corn:
2021/22: USDA raised its view of August 31 old crop ending stocks from 1.485 billion to 1.510. This was just over the 1.488 trade estimate (ALDL 1.511). Feed/residual was lowered by a moderate 25 million bushels. We were a little surprised to see no change in their 5.375 billion bushel estimate for whole-year corn for ethanol. This comes despite slight production setbacks since mid-April. Over the past 12 weeks US ethanol production is running -3.8% from our last normal driving year, 2019. USDA’s current goal implies we will meet that pace. Exports were left unchanged this month which is reasonable.
2022/23: New crop production was increased from 14.460 billion last month to 14.505. That came from higher acreage via the 6/30 report and no change to yields. USDA has only changed corn yields on the July report three times out of the past 20. There were no changes to new crop demand. Some would suggest new crop export sales, currently at 2.400 billion, may need to be curtailed in the coming months as Chinese buyers can now purchase Brazilian product. Ending stocks, raised from 1.400 billion to 1.470, were over the 1.442 trade estimate (ALDL 1.450). If we do get USDA’s yield, which is -2.2% from trend due to planting, then this stock level would imply 570 for December corn futures. Allendale would suggest for now, the market may need to trade a -4% discount due to current forecasts. A 1.209 stock would imply 625.
New crop world stocks were raised from 310.5 million tonnes to 312.9. Though no changes were made to the 2023 production estimates for Brazil or Argentina, USDA did recognize a 1 million tonne reduction for Russia’s small fall 2022 crop. No changes were made to China’s new crop estimates.
Soybeans:
2021/22: Old crop stocks were raised this month from 205 to now 215 million bushels. That was next to the 208 trade estimate (ALDL 196). Domestic crush was lowered by 10 while exports were left unchanged.
2022/23: New crop production was lowered this month from 4.640 billion last month to 4.505. This was a mechanical adjustment from lower 6/30 acreage but no change in yields. USDA has only changed soybean yields in July four times out of the past 20 years. Part of this lowered production was offset by an aggressive 65 million cut for new crop exports and a 10 million decline for crush. Ending stocks were lowered from 280 last month to now 230. This was just over the 211 trade estimate (ALDL 230). If there were no summer weather threat, and USDA’s view of trend yields was correct, then we see November soybeans valued at 1380. If you suggest a 2% reduction in yields for summer weather then price would run 1495.
New crop world stocks were lowered from 100.5 million tonnes to 99.6. Though USDA did increase Argentina’s just harvested soybean crop from 43.4 to 44.0 mt there was no change to their prior view of 51 for new crop. Brazil’s old and new crop production numbers were unchanged. On the China side USDA lowered their import goal from 99 mt to now 98.
Wheat:
2021/22: The old crop wheat marketing year ended on May 31. USDA’s 6/30 Grain Stocks report suggested USDA’s estimate for stocks of 655 million bushels would be raised to 660. There is no argument about the stock number. We would suggest USDA’s method of making that work on the balance sheet will need review. They adjusted 4 million bushels from seed and 1 from exports. That export number of 804 million bushels for the completed old crop year would be 118 million over the final old crop export from the weekly Foreign Agricultural Service. That is much over the normal discrepancy of 47 – 82 million bushels. The stock number won’t change in future reports. The demand numbers will be adjusted though.
2022/23: New crop all-wheat production rose from 1.737 billion bushels last month to 1.781. The trade expected a moderate increase to 1.745 (ALDL 1.723). Both US winter wheat and spring were over the trade expectation. With increases for soft red winter and white winter the total winter estimate increased from 1.182 to 1.201. US other spring wheat was estimated at 503 million, a bit over the 503 trade estimate. There was only a 25 million bushel increase for the new crop export to offset. New crop stocks were raised from 627 million to 639. That was on the 638 trade estimate (ALDL 628). With no Ukraine grain export deal KC would run 1050 and Chicago 1000. Markets are current trading as though there were a deal already in place.
World wheat ending stocks were raised from 266.9 million tonnes to 267.5. Canadian production was raised by a minor 1.0 mt while Russia was raised 0.5 to now 81.5. This Russian estimate is far under the 85 – 89 trade discussion. Declines in production were noted for Ukraine (21.5 to now 19.5) and Argentina (20.0 to 19.5). The most recent three estimates we have for Ukraine’s crop are 18.2, 21.8 and 20.8 from varying sources.
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