USDA, as they nearly always seem to do, once again surprised traders with higher-than-expected corn production along with higher stocks on corn, soybeans and wheat in the July USDA World Agricultural Supply and Demand Estimates (WASDE) report, sending the markets down hard on Wednesday.
CORN
Going into the report, most traders and analysts expected a minor adjustment in ending stocks for 2023-24 to move lower based on much lower June 1 stocks. They also expected yield and production on corn to fall under June levels due to lower yield expectations, despite the 94.1 million planted acres. With traders looking for a fall in yield of close to 6 bushels per acre (bpa) due to the ongoing drought, USDA instead lowered the yield only 4 bpa to 177.5 bpa. Using the higher planted acres from June, that resulted in a record-large crop of 15.320 billion bushels (bb) compared to trader expectations for nearly 200 million bushels (mb) less than that. The net effect was to boost ending stocks to 2.262 bb -- 5 mb higher than in June and 96 mb higher than the average trade estimate. Beginning stocks were 50 mb higher based on higher feed and residual, helping offset lower ethanol and exports. So, as strange as it may seem after enduring drought conditions in some of the primary corn producing states, USDA estimates the crop to be record large. If correct, the 2023-24 corn crop would be 172 mb over the last record crop in 2016.
On the global side, Brazil's corn crop was increased 1 million metric ton (mmt) to a record-large 133 mmt (5.23 bb), while Argentina's crop was reduced by a like amount. The EU corn crop fell by 900,000 mt to 63.4 mmt (2.49 bb), with EU corn imports raised by 1.5 mmt to 24 mmt (944 mb). The only other change was Ukraine corn production rising by 500,000 mt to 25 mmt (984 bb), and exports being increased by 500,000 mt to 19.5 mmt (768 mb). The ending stocks number for 2023-24 for corn was left virtually unchanged, at 314.1 mmt (12.4 bb) and about 1.5 mmt higher than expectations.
While most traders were expecting a slightly bearish report for corn, they got more than they bargained for. December corn was down a nickel prior to the report, at the close Wednesday, it was trading down 17 3/4 cents.
SOYBEANS
Soybean traders went into the July WASDE fully expecting bullish production, yield and stocks results. USDA chose to leave yield untouched at a record 52 bpa. Using the sharply curtailed planted acreage from the June report, of 83.5 million acres (ma), traders were looking for U.S. ending bean stocks to fall by close to 150 mb to a skimpy 206 mb. USDA instead chose to lower demand to account for the smaller crop (4.3 bb compared to 4.51 bb in June), by revising exports lower by 125 mb to 1.850 bb and lowering crush by another 10 mb to 2.3 bb. The net effect was a much more comfortable 300 mb carryout, only down 50 mb from June and sending the futures market reeling.
Trading 12 cents higher before the report, November plunged 32 1/2 cents by the close in a 53-cent trading range. The season average soybean price was lowered by 30 cents to $12.40 per bushel. Soybean meal average price rose by $10 per ton to $375 per ton while soybean oil average price was also bumped up, by 2 cents a pound, to 60 cents.
One the world front, there were very few changes made. The 2022-23 ending stocks rose a bit to 102.9 mmt (3.78 bb), while ending stocks for 2023-24 fell from June's 123.3 mmt to 121 mmt (4.45 bb). The only other notable change was that China's soybean imports were lowered by 1 mmt to 99 mmt (3.64 bb).
WHEAT
Wheat was certainly not the primary focus of most traders, intent on seeing changes to both the corn and soy crops after enduring months of drought, and the lowest crop ratings since 2012. It seems, in light of the focus on row crops, any wheat changes were bound to take a backseat.
All wheat production, at 1.739 bb, was about 70 mb higher than trade expectations, and nearly 90 mb higher than a year ago. Winter wheat was a large part of the gain, with production pegged at 1.21 bb compared to 1.136 bb in June, and trade expectations for 1.154 bb. Hard winter production, at 577 mb, is up 10% from June, while soft red, at 422 mb, is 5% higher, with white wheat being down 1% to 207 mb. Winter wheat yield was pegged at about 2 bpa higher than June, at 46.9 bpa. Other spring wheat was about 9 mb above trade expectations, at 479 mb. Ending stocks for 2022-23 figured to be 18 mb lower, at 580 mb, while 2023-24 ending stocks of 592 mb was a solid 30 mb higher than pre-report estimates. Feed and residual for wheat rose 20 mb to 90 mb, while imports of wheat declined by 5 mb. Hard red winter (HRW) wheat stocks are the lowest in 16 years, but HRW exports are being reported as the lowest since 1973-74. The season-average price for wheat was lowered 20 cents to $7.50 per bushel.
On the world front, there were some notable production changes, with production in Argentina, Canada and the EU falling due to dryness. Canada and Argentine production each fell by 2 mmt to 35 mmt (1.28 bb) and 17.5 mmt (643 mb), respectively, and EU wheat production was lowered by 2.5 mmt to 138 mmt (5.07 bb). China's feed and residual use of wheat was raised by 2 mmt to 36 mmt (1.32 bb). World ending stocks of wheat fell by 4.2 mmt to 266.5 mmt (9.79 bb) -- slightly bullish. However, wheat got caught up in the domestic bearish numbers and the "any port in a storm" type selling, as corn and beans crashed. Kansas City September closed down 14 cents, with Minneapolis down 10 1/2 cents, but spec-heavy Chicago plunged by 27 3/4 cents by the close.
FINAL THOUGHTS
Once again, the USDA reports had some surprises compared to trade expectations, and much of the change was bearish in nature, resulting in Wednesday's price plunge. We shall see if those record corn crop and bean yield projections come true, even with drought still gripping some parts of the corn and bean belt.
Dana Mantini can be reached at dana.mantini@dtn.com
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