USDA Report Preview

USDA's May 12 WASDE report will be the first in 2022 to offer a mix of old- and new-crop estimates, taking into account drought in several regions, the war in Ukraine and a new season of planting getting underway in the U.S.

CORN

The Thursday, May 12, World Agricultural Supply and Demand Estimates (WASDE) report finds traders concerned about drought in the western U.S. Plains, a chronic heatwave in India, dry conditions in central Brazil and northern Europe, COVID-19 lockdowns in China and war in Ukraine. Corn planting got off to a slow start in the Midwest but is picking up this week with help from warmer weather and a mostly dry forecast.

Dow Jones' pre-report survey of analysts expects USDA to reduce its estimate of old-crop ending corn stocks from 1.440 billion bushels (bb) to 1.404 bb. New-crop ending stocks are expected to be even lower, at 1.305 bb and depend on a 2022 corn crop of 14.779 bb, 2% smaller than last year. If true, the new-crop estimate will be the second-lowest corn surplus in nine years, but there is still much to learn.

As usual, May's new-crop estimates should be written lightly in pencil, as USDA's Acreage report is due out June 30, and DTN meteorologists are currently expecting above-normal temperatures and below-normal precipitation for most of the central U.S. in July and August.

On the demand side, corn exports are down 8% from last year's record pace, but prospects for future business look promising with South America suffering drought and Ukrainians doing all they can to fend off Russian attacks. U.S. ethanol production has slowed lately but remains 9% above last season's pace, or roughly 100 million bushels (mb) above USDA's current estimate.

On the world balance sheet, traders will be watching for reductions in USDA's 2021-22 corn crop estimates for Brazil and Argentina where conditions have been dry. There will also be a lot of attention on the new-crop corn production and export estimates for Ukraine. I don't envy USDA's impossible task, predicting production from a country at war.

Dow Jones' survey expects USDA to peg new-crop world ending corn stocks at 295.6 million metric tons (mmt) or 11.64 bb, down from 303.7 mmt or 11.96 bb in 2021-22. No matter what the numbers are, it will be difficult to have much confidence in any estimates for Ukraine, not knowing what Russia's President Vladimir Putin intends to do next.

South American corn crops are suffering dry weather and have good chances for reduced estimates Thursday. Dow Jones expect Brazil's corn crop estimate to be lowered from 116.0 mmt to 113.9 mmt or 4.48 bb. The crop estimate for Argentina is expected to be lowered from 53.0 mmt to 52.1 mmt or 2.05 bb.

SOYBEANS

For soybeans, crush and export demand have been so strong in the U.S. that there is a good chance USDA will reduce its estimate of old-crop U.S. ending soybeans stocks. Dow Jones' analysts expect USDA to cut its estimate of 260 mb of old-crop ending soybean stocks to 222 mb, the lowest in six years, if true. The survey also expects a new estimate of 319 mb of ending stocks in 2022-23.

Supporting the higher estimate of U.S. ending soybean stocks in 2022-23 will be a record-high soybean production estimate of 4.604 bb, based on a record-high 91.0 million planted acres from USDA's March survey of planting intentions. Planting intentions don't always turn out as expected, but USDA's more accurate planting report won't be available until June 30.

Argentina's soybean harvest is past the half-way mark, and Dow Jones' survey expects USDA to lower its estimate of that crop from 43.5 mmt to 42.8 mmt or 1.57 bb. Brazil's soybean harvest was over a month ago but could see a slight reduction from USDA's current estimate of 125.0 mmt or 4.59 bb.

Dow Jones' survey expects USDA to lower its estimate of 2021-22 world soybean stocks from 89.58 mmt to 89.0 mmt or 3.27 bb -- the lowest in six years. South American planting is still several months away for 2022-23, so it's difficult to put much weight in a stocks estimate that is expected to start at 98.0 mmt or 3.60 bb.

For a more accurate glimpse of how tight soybean supplies actually are, USDA estimated Brazil's actual ending soybean stocks at 72 mb for 2021-22 and Argentina's actual ending stocks at 176 mb in April.

WHEAT

With Russian missiles raining on Ukraine for over two months and the southwestern U.S. Plains praying for rain, concerns are high that world wheat supplies will remain tight in 2022-23. According to Dow Jones, USDA's first estimate of world ending wheat stocks in 2022-23 is expected at 271.6 mmt or 9.98 bb, down from Dow Jones' old-crop estimate of 278.3 mmt or 10.23 bb. If true, the new-crop estimate will be the lowest in six years. There will be plenty of interest in USDA's wheat crop estimates for major growing areas. Until recently, India was considered a possible source of surplus wheat to help make up for lost exports from Ukraine, but last week, India's government reduced its estimate of India's wheat crop to 105.0 mmt or 3.86 bb, the victim of a chronic heatwave.

Here in the U.S., the hard red winter (HRW) wheat crop is getting hit hard with drought, and the hard red spring (HRS) wheat crop is at risk of not getting fully planted with more rain expected to pass across the Northern Plains and southern Manitoba this week. The best average guess from Dow Jones' analysts is that USDA will estimate U.S. wheat production at 1.789 bb in 2022, up 9% from a year ago.

Personally, 1.789 bb sounds high, but the analysts surveyed may be correct in expecting a high starting estimate from USDA that could be trimmed later as more is learned. More specifically, Dow Jones' survey expects 683 mb of HRW wheat production, down from last year's 749 mb. The survey also expects 365 mb of soft red winter (SRW) wheat production and 199 mb of white wheat production.

For U.S. ending wheat stocks, Dow Jones' survey expects a slight increase in the old-crop estimate to 681 mb and a small reduction in 2022-23 to 655 mb. If true, the new-crop estimate will be the lowest U.S. surplus in nine years.

The one thing I can almost guarantee we will not see Thursday is an increase in USDA's estimate of U.S. old-crop wheat exports. Total sales and shipments of wheat are down 24% from a year ago with one month left in the season, and there is no reason to expect a miracle anytime soon.

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Join us at 12:30 p.m. CDT Thursday, May 12, as DTN's webinar looks at USDA's new estimates and what they mean for crop prices in the year ahead. We'll explain which estimates are helpful, which are suspect, and we will also point out the market's own clues. For those busy at 12:30 p.m., there will be a link provided to replay the webinar at your convenience. Register here for Thursday's May WASDE report webinar: https://www.dtn.com/….

Todd Hultman can be reached at todd.hultman@dtn.com

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