While most in the trade had expected U.S. soybean exports to be moved higher and ending stocks lower in the June World Agricultural Supply and Demand Estimates (WASDE) report, I think the reduction in corn exports by 50 million bushels (mb) was a bit of a surprise. However, the report seemed to be a non-event just after its release, with corn and beans trading close to pre-report levels just one hour later.
Below are some of the changes in both U.S. and world numbers in USDA's June 10 report.
Corn exports for 2021-22 were revised lower by 50 mb, while food, seed and industrial (FSI) was increased by 5 mb. I think few traders were looking for a cut in U.S. corn demand with the absence of Ukraine, and it appears that few believed USDA, as corn finished with a small gain. That, in turn, led to higher-than-expected ending stocks for both old and new crop, with traders expecting 2021-22 ending stocks to fall to 1.337 billion bushels (bb); instead, they moved higher by 45 mb to 1.483 bb. That increase in beginning stocks for 2022-23, with no change in yield and production, resulted in a higher-than-expected new-crop carryout of 1.4 bb.
On the world front, both Argentina and Brazil corn production had no changes, which may have been construed as a bit bearish as well. Perhaps the most notable change was in war-torn Ukraine, where corn production was increased from 19.5 million metric tons (mmt) to 25 mmt (984 mb). Ukraine feed use of corn was also bumped up by 1.5 mmt. The net result was an increase in global ending corn stocks to 310.5 mmt (12.2 bb), a gain of 5.7 mmt, and more than Dow Jones' trader surveys were looking for. Still, the bearish Ukraine change meant little to traders, as the majority of Ukraine grain has been sitting in bins since the February invasion by Russia. There remains plenty of doubt on how much new crop Ukraine can export.
As expected, USDA revised U.S. old-crop soy exports higher to account for the higher pace of exports currently, with total commitments 63 mb over the yearly USDA estimate. With shipments of those sales lagging to date, USDA chose to raise exports by just 30 mb, sending old-crop ending stocks to just 205 mb and new-crop ending stocks to 280 mb from May's 310 mb reading. The stocks numbers were a bit bullish, but not unexpected at all. It seems very likely that we could see a further increase in U.S. soy exports.
On the world front, changes of note were both Brazil and Argentine increases in production, with Brazil up 1 mmt on higher area for top producer Mato Grosso to 126 mmt (4.63 bb), and Argentina up 1.4 mmt to 43.4 mmt (1.59 bb), on better-than-expected yields. There were few other changes, and that resulted in only a minor change to 2022-23 ending stocks, from 99.6 mmt to 100.46 mmt (3.69 bb). There were no other changes of note, and soybean futures traded much of the day close to pre-report levels. There were no changes made to China demand.
On the wheat side, if you thought corn and bean numbers were a bit boring, it was even more so for U.S. wheat. Only minor tweaks in wheat production occurred, with winter wheat production up 8 mb from May to 1.182 bb. Wheat yield rose by 0.3 bushel per acre (bpa) to 48.2 bpa, but still down 2 bpa from a year ago. While hard red winter wheat declined by 8 mb to 582 mb, it was winter white wheat, which increased by 12 mb versus May to 242 mb, that was responsible for much of the change.
On the global side, WASDE pegged Indian wheat production at 2.5 mmt lower than May, at 106 mmt (3.89 bb), the result of a heatwave, and lowered exports by 2 mmt to 6 mmt (220 mb). The trade may have been looking for a more bullish Indian number, with some private analysts as low as 99 mmt (3.63 bb) prior to the report. On the other side of the coin, Russia, which has had beneficial weather, had their wheat crop raised by 1 mmt to 81 mmt (2.97 bb), and that increase went right into exports, which are now figured to be 40 mmt (1.47 bb). Ukraine wheat production was left unchanged at 25.5 mmt. The only other minor change was a 400,000-mt decrease in EU wheat production, to 136.10 mmt (5 bb). World wheat ending stocks moved slightly lower, from 267 to 266.85 mmt (9.85 bb), and still the lowest in six years.
As typical, the June WASDE was not a big market mover, with only a few changes. Following the report, it seems like traders have gone right back to focusing on strong cash markets, Ukraine and weather as the driving market forces. Soybeans finished report day weak, and right at the support level following Thursday's breakout. Corn ended up little changed, and wheat ended stronger. The emphasis over the next few weeks will be on the extent of next week's expected ridge of high pressure, as the world can ill afford any crop disasters.
Dana Mantini can be reached at firstname.lastname@example.org
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