USDA Reports Preview

USDA's December World Agricultural Supply and Demand Estimates (WASDE) and Crop Production reports are due out Friday, Dec. 9, at 11 a.m. CST with DTN coverage following shortly after the report's release and a WASDE report webinar set for 12:30 p.m. U.S. demand estimates, South American row-crop estimates, and Southern Hemisphere wheat estimates will get the most attention, but a surprise is also possible.

CORN

Many that expected a lower corn demand estimate in USDA's November WASDE report will likely find satisfaction in Friday's December WASDE report, as corn exports have yet to improve, and new concerns are emerging about the future of ethanol demand. Dow Jones' survey of 19 analysts expects USDA to increase its estimate of U.S. ending corn stocks from 1.182 billion bushels (bb) to 1.241 bb for 2022-23. If true, it will be the second-lowest U.S. corn stocks in nine years.

U.S. production estimates won't get a new look until the January WASDE report, but there is room for corn export demand to come down with season-to-date U.S. export commitments down 48% in the first quarter of 2022-23 from a year ago. Brazil currently holds an 8% advantage on export prices. Softer ethanol demand is a relatively new bearish concern that USDA may or may not act on. Wednesday's report from the U.S. Energy Department showed U.S. gasoline demand down 7% last week versus a year ago. The price of ethanol in Chicago recently fell to its lowest level in nine months.

The one piece of encouragement for corn prices continues to be that corn's national cash basis is the strongest in over 20 years, a bullish clue about corn's value, coming from the companies that know the corn market best. I heard a lot of upbeat conversation from farmers at last week's Peoria Farm Show, thankful for record yields in 2022, and I have to wonder what is keeping basis so strong? So far, it is a mystery, not easily explained unless actual corn supplies are tighter than we think.

Dow Jones' survey expects USDA to slightly increase its estimate of world ending corn stocks from 300.76 million metric tons (mmt) to 300.9 mmt (or 11.85 bb). There are drought concerns in Argentina, but USDA may choose to ignore the situation until January. Current crop estimates for Brazil and Argentina are 126.0 mmt (4.96 bb) and 55.0 mmt (2.17 bb), respectively. The more important metric to watch is USDA's estimate of world ending corn stocks, excluding China, a number last seen at 94.6 mmt (or 3.73 bb), the second-lowest total in nine years.

SOYBEANS

While corn and wheat prices have been making new lows lately, soybean prices have held firm the past month and continue to find support from active demand, even with barge restrictions on the Mississippi River. Dow Jones' survey of analysts expects USDA to increase its estimate of U.S. ending soybean stocks from 220 million bushels (mb) to 236 mb, still the lowest in seven years.

Nine of the 19 analysts expect the estimate to stay unchanged, and I side with the minority. It's difficult to remember a time when soybean demand was this good. Soybeans' crush incentive came down recently as soybean oil prices reacted negatively to last week's new renewable fuel standards from the Environmental Protection Agency. However, U.S. diesel supplies are down 7% from a year ago, and more soybean oil is needed to help those diesel supplies go further.

Soybean sales to China are always a concern this time of year, but even with all of 2022's negative headlines about China's economy and legitimate concerns about a big crop on the way from Brazil, U.S. soybean sales to China in 2022-23 are up 11% from a year ago, and more were reported earlier this week.

Dow Jones' analysts expect USDA to keep its estimate of world soybean stocks roughly unchanged at 102.2 mmt or 3.76 bb. Keep in mind USDA's estimate reflects midseason stocks for Brazil and Argentina; actual ending stocks are much tighter. USDA will probably keep Brazil's soybean crop estimate unchanged at 152.0 mmt (or 5.58 bb), as early crop conditions have been generally favorable. As mentioned above, however, drought is a concern in Argentina, and early planting has been slower than normal. USDA may ignore the problem in a December WASDE report, but there is room for a modest reduction in Argentina's crop estimate of 49.5 mmt (or 1.82 bb).

WHEAT

Until Wednesday, Dec. 7, wheat prices have been steadily sagging to new lows for nearly two months. In the case of March Chicago wheat, Tuesday's close of $7.29 per bushel was the lowest close this year, before popping up to $7.49 1/2 Wednesday. Fundamentally, the price weakness has been difficult to explain, and that raises the question: Will USDA have some surprise of new supplies in this report?

If there is a surprise, Russia and Australia are the two most likely candidates. Private wheat crop estimates for Russia have been higher than USDA's 91.0 mmt estimate for several months. Part of the discrepancy may be explained by confusing boundary definitions after Russia stole Ukrainian grain. Australia's crop agency, ABARES, increased its wheat crop estimate to 36.6 mmt (or 1.34 bb) Monday, Dec. 5, part of which was likely degraded by excess rain in eastern Australia. USDA's current estimate for Australia's wheat crop is 34.5 mmt.

Dow Jones' analysts don't seem to expect any supply surprise, anticipating USDA to lower its estimate of world ending wheat stocks slightly, from 267.8 mmt to 267.0 mmt (or 9.81 bb). I will be keeping an eye on USDA's estimate of world ending wheat stocks, excluding China, a number estimated at 123.5 mmt (or 4.54 bb) in November -- the lowest in 15 years.

For the U.S., ending wheat stocks are expected to creep higher, from 571 mb to 578 mb, still the lowest in 15 years. Wheat exports have been slightly below USDA's estimated pace, but expectations are already low in 2022-23.

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Join us at 12:30 p.m. CST Friday, Dec. 9, as we discuss USDA's new estimates and what they mean for crop prices. We are also glad to take your questions. For those busy at 12:30 p.m., there will be a link provided to replay the webinar at your convenience. Register here for Friday's December WASDE report webinar: https://www.dtn.com/….

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

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