USDA Reports Preview

On Thursday, Jan. 12 at 11 a.m. CST, USDA will issue a Crop Production report, a World Agricultural Supply and Demand Estimates (WASDE) report, a Grain Stocks report for December 1 and its annual report of Winter Wheat Seedings.

CORN

After USDA cut corn's export estimate by 75 million bushels (mb) in December, another reduction could be on the way Thursday as corn export commitments in 2022-23 are down 47% from a year ago at this time, losing business to cheaper prices in Brazil. Dow Jones' survey of 19 analysts expects USDA to increase its estimate of U.S. ending corn stocks from 1.257 billion bushels (bb) to 1.302 bb. Ethanol is another suspect on the demand side, but so far in 2022-23, ethanol production is keeping pace with a year ago.

USDA's estimate of corn production is expected to stay roughly the same at 13.922 bb with a yield of 172.4 bushels an acre on 80.7 million harvested acres. Given the impressive reports in the Eastern Corn Belt later in the harvest season, there is room for a modest increase in the corn production estimate.

Analysts expect a small decline in USDA's estimate of world ending corn stocks, going from 298.4 million metric tons (mmt) to 298.0 mmt or 11.73 bb. Brazil's 126.0 mmt corn crop estimate should be safe, but Argentina's 55.0 mmt estimate has room to come down after the Buenos Aires Grain Exchange recently said only 13% of the corn crop was rated good to excellent. There is 18% of Argentina's crop said to be in or through the pollination stage, down from 34% normally for this time of year. World corn stocks apart from China were estimated at 92.29 mmt or 3.63 bb in December and is the more important metric to watch.

SOYBEANS

Demand has been active for U.S. soybeans in the first four months of 2022-23 and that should limit any increase in USDA's ending stocks estimate to changes on the production side of the ledger. Dow Jones' survey expects USDA will increase soybean production by 14 mb to 4.360 bb and will increase the estimate of U.S. ending soybean stocks by 16 mb to 236 mb. If true, it will still be the lowest U.S. ending soybean stocks in seven years.

The bearish concern for soybeans is Brazil's next soybean crop, already estimated by USDA at a record-high 5.58 bb or 152.0 mmt. The interesting twist is that Argentina's soybean crop is estimated at 49.5 mmt, but because of drought, has room to come down, if USDA chooses. Because Argentina's soybeans are just entering the blooming stage, USDA may hold off on making changes for Argentina Thursday. Dow Jones' survey expects USDA to slightly reduce its estimate of world soybean stocks from 102.7 mmt to 101.9 mmt or 3.74 bb. Going by local ending stocks, USDA expects Brazil to end its season on Jan. 31 with 74 mb of soybeans and Argentina to end its season on March 31 with 184 mb of soybeans, relatively tight finishes for both seasons.

WHEAT

March KC wheat prices recently fell to their lowest level in 11 months and it naturally makes me wonder if USDA is holding some bearish surprise in Thursday's report. Aside from the recent sell-off in prices, it is difficult to see from a fundamental view what all the selling is about and Dow Jones' survey of 19 analysts seems to agree. According to the survey, USDA is expected to slightly increase its estimate of U.S. ending wheat stocks from 571 mb to 582 mb, still the lowest in 15 years.

USDA's estimate of world ending wheat stocks is also expected to increase slightly, from 267.3 mmt to 268.3 mmt or 9.86 bb, the lowest in six years, if true. The more important metric for world wheat excludes China and those ending stocks were estimated at 122.97 mmt or 4.52 bb in December, the lowest in 15 years.

When looking at world crop estimates, traders' attention will likely go first to Argentina, Australia and Russia. Argentina's wheat crop has already been knocked down to 12.5 mmt, but could go a little lower. There is talk of a possible increase in Australia, but also lots of questions about the quality of Australia's wheat this year after eastern Australia was hit by heavy rains at harvest. USDA's current 91.0 mmt wheat crop estimate for Russia has been lower than most, but the situation is muddled by Russian theft in southern and eastern Ukraine.

DEC. 1 GRAIN STOCKS

Corn:

Dow Jones' survey of analysts expects USDA to find 11.187 bb of corn on hand as of Dec. 1, 2022, down from 11.642 bb the previous year and the lowest for the date in nine years. This report will be especially interesting because export sales are off to a horrible start and feed demand has been difficult to assess, factoring in cattle herd liquidation, avian influenza and a hog inventory that is supposed to be down from a year ago, but has cash prices that act like supplies are plentiful. Despite a drop in gasoline demand since September, ethanol production has held steady with a year ago. In addition to the factors above, the national corn basis remains at its strongest level in over 20 years.

Soybeans:

Dow Jones' survey expects USDA to find 3.145 bb of soybeans on hand as of Dec. 1, 2022, slightly less than last year's 3.152 bb total. If true, it will also be the second lowest Dec. 1 total in six years, which doesn't give a lot of confidence about USDA estimating U.S. ending stocks at their lowest total in seven years. U.S. soybean export sales are apt to be lower in 2022-23 if Brazil's record crop comes through as expected. Crush demand should finish stronger than usual, however, thanks to the increasing use of soybean oil to make renewable diesel fuel. It remains to be seen how the season will play out and Thursday's soybean stocks total will offer an interesting clue.

Wheat:

The way wheat prices have been falling lately, it is fair to wonder if there is a bearish surprise waiting in the amount of wheat USDA finds on Dec. 1. Fundamentally, a bearish surprise doesn't seem likely as 2022 production should be well understood by now. U.S. wheat export commitments are down 6% from a year ago, which is below USDA's estimated pace, but is also well known. Dow Jones' survey expects USDA to show 1.347 bb of wheat on hand as of Dec. 1, down slightly from last year's 1.378 bb. If true, it will be the lowest in 15 years for the date, on track with USDA's estimate of ending stocks.

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Join us at 12:30 p.m. CST Thursday, Jan. 12 as we discuss USDA's new estimates and what they mean for crop prices. We are also glad to take questions. For those busy at 12:30 p.m., there will be a link provided to replay the webinar at your convenience, but you need to register.

Register here for Thursday's January WASDE report webinar:

https://www.dtn.com/…

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

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