- HEADLINES: USDA’s latest report leans bearish grain, bullish soy; Report largely ignored; US forecast stays dry.
- On paper, the USDA’s June WASDE leans slightly bearish grain and neutral oilseed markets. US and global corn stocks were increased slightly amid lower projected US exports, which makes little sense, and as NASS boosted its US national winter wheat yield estimate 0.3 bu/acre, with this SRW and winter wheat production hike adding 8 million bu to 2022/23 US wheat stocks. Yet, once again, the market has shrugged off USDA data and is instead focused on incredible cash market strength and the coming lengthy period of US heat and dryness. End users were hoping for a post-report break to extend coverage, and so far, it appears this has occurred.
- Old crop US corn exports were trimmed 50 million bu, with USDA citing Census exports in April and May inspections data. We view Census data as supporting an increase in US corn exports, and we note that inspections may test recent highs in the weeks ahead amid a growing corn ship line-up. We maintain a final 2021/22 US corn export estimate of 2,700 million bu, vs. USDA’s 2,450. New crop industrial corn use was lifted 5 million bu, but otherwise no changes were made.
- Old crop US soy exports were raised 30 million bu to better account for the pace of sales and shipments data. 2021/22 stocks were cut by a like amount, with 2022/23 stocks lowered 30 million to 280 million bu amid reduced openinfg stocks. We look for another 25-50 million bu hike in old crop US exports, which maximises the burden being placed upon growing conditions this summer. USDA’s new crop seasonal average cash soybean price was pegged at $14.70, vs. $14.40 in May.
- World balance sheet adjustments, too, lean slightly bearish but the market understands that USDA remains far too high on Black Sea and Indian wheat exports. Global soy end stocks will expand by just 14 million mt in 2022/23 assuming S American production rebounds by a massive 31 million mt.
- WASDE lowered Indian wheat production and exports a token 2.5 and 2.0 million mt respectively, while a vast majority of the trade has Indian wheat production at 99-100 million mt, vs. USA’s 106, and exports at just 1-2 million mt, vs. USDA’s 6 million. Ukrainian corn production was lifted to 25 million mt, vs. 19.5 previously, amid seedings data from the Ukrainian government. However, Ukrainian corn exports were left untouched at 9 million mt, vs. 20 million in 2021/22, and even this number may by 2-3 million mt too high if Russia’s blockade isn’t lifted by late year.
- Importantly, as supply is debated, WASDE left 2022/23 global wheat trade unchanged at 205 million mt, vs. a projected 199 in 2021/22. World soybean trade in 2022/23 is pegged at 170 million mt, vs. 156 million in 2021/22.
- Global corn trade is projected to decline 13 million mt in 2022/23 to 183 million as the USDA assumes some measure of rationing occurs amid the lack of Ukrainian supplies. This will either be proven or not based on actual physical global trade beginning in October.
- The midday GFS weather forecast is similar to the overnight run in projecting intense/expansive high pressure ridging aloft the Plains and Midwest beginning early next week. Maximum temperatures in the 90s/low 100s will be widespread. The GFS forecast does allow cooler/wetter conditions to slide into the E Midwest beginning June 21, but confidence in this is low. EU and Canadian models will be monitored for confirmation.
- WASDE reports have not provided market guidance since late 2022 and the June release is no different. Cash markets and Northern Hemisphere weather dominate price discovery in the near-term and it is critical that Russian wheat exports show improvement once the current quota system ends in mid-summer. Otherwise, supply rationing will be needed by winter. Minor spring crop yield loss in the US, Canada, Europe, or Black Sea forces a test of recent highs. We maintain a strategy of buying breaks.