USDA Reports Review

The USDA World Agricultural Supply and Demand Estimate (WASDE) report for October projected much higher yield, production and stocks than traders expected, sending corn and soybean markets into the tank Tuesday. Corn yield fell just shy of the 2018 record at 176.5 bushels per acre (bpa) and bean yield was raised nearly 1 bpa, resulting in a much more comfortable ending stocks level. Wheat ending stocks fell, as expected, by 35 million bushels (mb).

CORN

USDA on Tuesday's WASDE report showed October's yield estimate at 176.5 bpa, just shy of the 2018 record yield of 176.6 bpa. It is hard to believe the corn crop could overcome what has been described as the hottest July on record to reach such lofty levels. That yield on unchanged harvested acres put production up to 15.019 billion bushels (bb) -- 23 mb higher than in September and 71 mb higher than Dow Jones' pre-report estimates. Feed and residual use was lowered by 50 mb, while corn exports were raised 25 mb to 2.5 bb, no doubt to account for lost Brazilian production. The net effect was an ending stocks number of 1.5 bb, 92 mb higher than in September.

On the world front, corn ending stocks moved from 297.6 million metric tons (mmt) (11.7 bb) to 301.74 mmt (11.88 bb), a gain of over 4 mmt. Ukraine corn production was lowered by 1 mmt to 38 mmt (1.5 bb), while the European Union rose 800,000 mt to 66.3 mmt (2.61 bb). China's corn crop was left unchanged at 273 mmt (10.7 bb) despite the ag minster there having dropped it another 2 mmt. Brazil's corn exports were slashed another 2 mmt to 20 mmt (787 mb) for 2020-21, down 15 mmt from the 2019-20 season due to the severe drought during the last several months.

Corn futures were trading down 7 cents prior to the report release and closed the day down 10 1/2 cents.

SOYBEANS

As expected, the soybean numbers were bearish, but they turned out much more bearish than traders had anticipated. Soybean yield was raised by nearly 1 bpa to 51.5 bpa and soy production rose to 4.448 bb, 74 mb more than the September report. Soy imports were reduced by 10 mb and soybean crush was raised 10 mb to 2.190 bb. Due to the finding of 81 mb more soybeans in the September report for 2020-21, soybean ending stocks rose to 320 mb, up 135 mb from the September carryout and up more than 31 mb from what the trade had expected. The 320 mb ending stocks is a far cry from predictions several months ago that indicated soybean ending stocks could even go negative. However, China has slowed their buying efforts, and the Gulf terminal damage inflicted by Hurricane Ida made exports even more challenging.

On the world side, soybean ending stocks were raised by 5.7 mmt to 104.57 mmt (3.84 bb), sharply higher than the 101 mmt that the trade had anticipated. U.S. production was increased by 2 mmt to 121.06 mmt (4.448 bb). Argentine production for the coming year was lowered by 1 mmt to 51 mmt and China crush was reduced by 1 mmt to 93 mmt (3.42 bb).

Prior to the report release, November soybeans were already trading down 14 cents, but by day's end November losses doubled, closing down 30 cents and below $12.00 for the first time since March. The season average soybean price was reduced by 55 cents to $12.35 per bushel.

On a side note, soybean oil stocks were raised to 1.798 million pounds from 1.478 million in September. Ending stocks of meal fell to 400,000 short tons from 500,000 short tons in September, but the season average price for meal was lowered to $325 from $360 in September.

WHEAT:

The October WASDE report for wheat was not quite as dramatic as that of corn and soybeans. Prior to the report, Dow Jones' trader survey had 2021-22 ending stocks for U.S. wheat falling to 581 mb from 615 mb in September. That was almost spot on, as ending stocks fell to 580 mb -- the lowest level since 2007-2008. Wheat imports were lowered by 10 mb to 125 mb, no doubt the result of Canada's poor wheat crop, and wheat feed and residual was cut by 25 mb. Wheat harvested acres declined by 900,000 acres to 37.2 million acres and the wheat yield fell to 44.3 bpa from 44.5 bpa. The season average farm price was raised by a dime to $6.70 per bushel. Hard red winter ending stocks fell to 311 mb from 347 a month ago, while soft red was down 5 mb at 94 mb and spring wheat rose by 2 mb.

The world had some notable changes with Canada's wheat production dropped again, by 2 mmt to just 21 mmt (772 mb), and EU production was increased by 400,000 mt to 139.4 mmt (5.12 bb). Iran's wheat production was dropped 1.5 mmt and Iran stocks fell by 3.6 mmt.

The net effect was a world wheat ending stocks number of 277.18 mmt (10.2 bb) compared to 283.2 mmt in September. Traders had anticipated an ending stocks number of 280.9 mmt.

Prior to the report, Kansas City wheat was little changed; but by the end of the day, Kansas City December rose by 5 1/4 cents as major wheat exporter stocks continue to slide.

CONCLUSION

Perhaps the big takeaway from the October WASDE report was the dramatic turnaround in the U.S. soy balance sheet. It was just months ago traders were braced for the potential of the lowest ever -- or even a negative -- soy balance sheet. Tuesday's WASDE certainly ended that thinking, with the much more comfortable 320 mb ending stocks.

All eyes will be on China in coming weeks as they have been slow to buy U.S. soybeans. With the prospect for a record large Brazilian soy crop, estimated at 144 mmt (5.29 bb) -- granted, very prematurely -- soybean futures could slide even further. However, China is thought to be very short-bought and one would think they'll return to buy at $12 or sub-$12 levels as La Nina appears to be waiting in the wings to threaten southern Brazil and Argentine production.

Corn has shown its resilience in a year that certainly had major weather issues, as that balance sheet has also loosened up, and the wheat balance sheet continues to tighten up both in the U.S. and in the world.

Dana Mantini can be reached at dana.mantini@dtn.com

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