USDA Reports Preview

After a month of more falling crop prices, USDA's July World Agricultural Supply and Demand Estimates (WASDE) report has a chance to interrupt the current economic worry-fest and put market attention back on the prospects for this year's grain supplies. USDA's WASDE and Crop Production reports are due out at 11 a.m. CDT on Tuesday, July 12.

CORN

December corn prices, which were trading above $7 a month ago, were below $6 a bushel Thursday, July 7, but we probably won't find enough changes in estimates in Tuesday's WASDE report to explain the sudden drop in prices. The recent selling was largely triggered by talk of rising interest rates and recession -- two topics that don't have strong direct ties to crop prices but do have the ability to frighten speculators out of their long positions.

According to Dow Jones' survey of analysts, USDA is expected to increase its estimate of new-crop U.S. ending corn stocks from 1.400 billion bushels (bb) to 1.433 bb, based on a 14.520 bb crop and a record 177.0-bushel-per-acre yield. You may recall that on June 30, USDA estimated 89.9 million acres of corn plantings. The June estimate is subject to a second survey in the Dakotas and Minnesota, which will be released on Aug. 12, if the findings are different.

In the June WASDE report, USDA estimated an average farm price of $6.75 per bushel for corn. Based on the past 25 years of historical prices, indexed for inflation, the roughly 10% ending stocks-to-use ratio in corn suggests a cash price near $5.50 per bushel, but we must acknowledge trader emotions are higher than usual this year with lots of outside market distractions going on. There is also plenty of weather risk ahead.

With Brazil in the midst of its second corn harvest, traders will be watching for USDA's 2021-22 corn production estimate for Brazil, last estimated at a record-high 116.0 million metric tons (mmt) or 4.57 bb. On Thursday, Brazil's crop agency, Conab, generally agreed with USDA, estimating 2021-22 production at 115.7 mmt.

Dow Jones' survey expects USDA to slightly increase its estimated 2022-23 world ending corn stocks from 310.45 mmt to 310.7 mmt or 12.23 bb. The main interest in the new season is largely centered on the U.S. and Ukraine, where new crops are in play. Of course, Ukraine remains a difficult place to farm in 2022, and expectations for significant exports remain low. Ukraine's ag minister recently said grain exports increased 25% in June to 2.17 mmt, an impressive accomplishment, but far below last year's pace.

Tuesday's WASDE report won't have much to say about the weather forecast, but weather is the key variable for this year's corn prices, and the forecast is looking drier as we head toward mid-July.

SOYBEANS

On June 30, USDA estimated soybean plantings on 88.3 million acres. As mentioned above, a second survey result from three states will be released on Aug. 12, if it turns out to be different from USDA's June 30 estimate.

With soybean acres now less than expected, Dow Jones' survey expects USDA to lower its soybean crop estimate for 2022 from 4.640 bb to 4.515 bb, and its estimate of new-crop U.S. ending stocks from 280 mb to 214 mb, possibly the lowest in seven years. This early in the season, USDA probably won't stray from its current yield estimate of 51.5 bushels per acre.

The one bearish risk in this otherwise bullish scenario is that soybean shipments are not keeping pace with USDA's export estimate of 2.170 bb in 2021-22, and there is a risk that old-crop ending stocks could end higher than the 205 mb USDA estimates in June.

With July soybeans trading over $1 per bushel above the August contract and not showing any deliveries as of Thursday, July 7, it is difficult to believe old-crop soybean stocks could turn out higher than expected, but if you recall, we could have made the same argument last year.

In June, USDA estimated South American soybean crops at 126.0 mmt or 4.63 bb in Brazil and at 43.4 mmt or 1.59 bb in Argentina. Those estimates are not apt to show much change this month. For the new-crop season, Dow Jones' survey expects USDA to lightly reduce its estimate of world soybean stocks from 100.46 mmt to 99.2 mmt or 3.65 bb. In terms of local marketing years, USDA estimates Brazil will have 83 mb of soybeans on hand at the end of 2021-22, similar to the previous year's tight ending surplus.

WHEAT

USDA's June 30 Grain Stocks report informed us that the 2021-22 season ended with 660 mb of ending U.S. wheat supplies, the lowest in eight years. It was not surprising that Russia's attack on Ukraine did not result in a lot of wheat export business for the U.S., as Europe was geographically poised to benefit. However, it was surprising demand for U.S. wheat only totaled 1.926 bb in 2021-22, the lowest in 12 years.

If Dow Jones' survey is correct, Tuesday's new estimates from NASS will show all wheat production at 1.744 bb in 2022, up 98 mb from last year. Winter wheat production is expected to be 89 mb lower in 2022-23, at 1.188 bb, while other spring wheat production is expected to be up 108 mb at 449 mb. As with corn and soybeans, the planting estimate for spring wheat may be adjusted on Aug. 12, already near its lowest level in 50 years.

Slightly larger wheat production in 2022-23 and another year of slow demand are expected to keep ending U.S. wheat stocks at 644 mb, says the analysts in Dow Jones' survey, the lowest in nine years, if true.

USDA's international estimates are apt to get plenty of attention, especially on the production and export estimates for both Russia and Ukraine. There is room for USDA's crop estimate for Russia to be increased from the current 81.0 mmt or 2.98 bb, based on private estimates. Russia's export estimate may also be increased based on reports of smuggling Ukrainian wheat. Maybe that is what Russia referred to as safe passage for Ukrainian grain when it made the proposal in late May.

For world ending wheat stocks, Dow Jones' survey expects USDA to slightly increase its estimate from 266.85 mmt to 267.80 mmt or 9.84 bb, the lowest in six years. If all goes as planned, there probably won't be much price response to Tuesday's new USDA estimates, but there is plenty of volatility these days with lots of attention on weather and outside market concerns.

**

Join us at 12:30 p.m. CDT Tuesday, July 12, as DTN's webinar explains USDA's new estimates and what they mean for crop prices in the year ahead. We'll talk about which estimates are reasonable, which are not and will also compare USDA's views with 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 Tuesday's July WASDE report webinar: https://www.dtn.com/….

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

Follow Todd Hultman on Twitter @ToddHultman1

(c) Copyright 2022 DTN, LLC. All rights reserved.