The monthly WASDE report provided a little something for everyone with bullish undertones for corn and wheat while key data points weighed heavily on soybeans.
USDA August WASDE Recap:
Despite the report being mostly friendly for corn and wheat, the eye-popping numbers for soybeans seemed to dominate the discourse and price action following today’s USDA report. For corn, planted and harvested areas were modified slightly lower from last month while domestic use and exports were notched higher. It was nearly the exact opposite for beans. Planted and harvested areas both increased slightly, but the big surprise came in global ending stocks climbing 7 MMT from last month to 134.30 MMT – greater than the range of expectations. Wheat production and ending stocks were both notched lower, but within initial traders’ range of estimates.
Corn:
Price action in December corn futures was mostly constructive following the neutral-to-friendly USDA report. USDA stuck to their guns and called for record yields with 183.1 BPA average, which was at the upper boundary of the expected range. Despite the modest reduction in harvested area (82.710 mil. acres) Production totals were slightly higher than expected at 15.147 Bil Bu as a result of the strong yield estimates. The most bullish line item adjustments in this month’s report were the modest reductions in domestic ending stocks, slightly higher projected exports, and increased domestic use. Export performance has been a feather in the cap for corn, now up 37% YTD. If we can see sales and inspections continue their pace, the potential for a relief rally remains in the cards.
Soybeans:
There’s no two ways around it – today’s WASDE was bearish for soybeans. Planted and harvested area for domestic soybeans were up 1 mil acres each to 87.1 and 86.3 mil acres respectively. Moreover, USDA expects national average yields to be record-high at 53.2 BPA. As a result, domestic soybean production is pegged sharply higher at 4.589 billion bushels (compared to average pre-report estimate of 4.472 bil bu). Ending stocks consequently skyrocketed 125 mil bu from last month to 560 mil bu, which unsurprisingly was well above the expected range. However, arguably the loudest canary in the coal mine lies in the global numbers. Global ending stocks swelled 7 MMT from last month to 134.3 MMT. Moreover, when looking at the “World Less China” soybean stocks total just 88.62 MMT – meaning that China’s soybean holdings account for roughly 34.1% of global soybean stocks. That paints a murky picture in seeing a ramp up in soybean export sales, which are 15% lower YTD.
Wheat:
As in corn, total wheat ending stocks were adjusted slightly lower this month in conjunction with slightly higher domestic usage. While none of the figures were materially surprising, today’s USDA report was mostly friendly for wheat. Domestic wheat stocks were down 28 mil bu from last month to 828 mil bu today, while domestic wheat usage rose 2 mil bu to 1.961 mil bu. Global wheat figures mirrored the domestic figures with global ending stocks down 0.62 MMT to 256.62 MMT, while global wheat exports were up nearly 2 MMT this month to 214.86 MMT. Wheat values have been beaten down for the better part of the last three months. If production concerns stemming from Eastern Europe continue to permeate in conjunction with an improving domestic outlook, a relief rally in wheat prices seems feasible.
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