- HEADLINES: USDA July report bearish on extra 2023/24 soybean/wheat stocks; US 2023/24 corn stocks large as expected at 2.25 billion bu.
- Chicago grain futures are sharply lower at midday following a bearish USDA July Crop Report. WASDE decided to cut the US corn yield to 177.5 bushels/acre (down 4.0 bushels/acre) due to record dry May/June but held their soy yield at trend at 52.0 bushels/acre. Although not a surprise, the trade was estimating 2023/24 US soybean end stocks at 200 million bu, so a total of 300 million bu was bearish. US corn stocks at 2,260 million bu was at trade expectations while the US wheat yield was better than forecast at 46.1 bushels/acre. On a bullish note, China’s 2022/23 soy imports were raised to a record 100 million mt and WASDE is still low by 2-3 million.
- Chicago wheat, corn, and soy futures are sharply lower, but we doubt that values drop into a lasting bearish trend. We expect that December corn will test key support below $4.80 while November soybean futures hold $13.00.
- WASDE estimated 2022/23 US corn end stocks at 1,402 million bu, a drop of 50 million bu due to an expansion of US corn feed residual to 5,425 million bum(+150 million) and a cut in exports to 1,650 million bu (down 75 million bu) and a 25 million cut in ethanol usage to 5,225 million bu. US corn exports account for slow sales.
- World 2023/24 corn end stocks rose to 314 million mt, unchanged from June. The 2023 Brazilian corn crop was raised to 133 million mt (up 1 million) while the Argentine crop was cut to 34 million mt (down 1 million). Yield data argues that WASDE is too high by 2-3 million on the Argentine crop with future cuts ahead. 2023/24 world corn stocks were up a modest 17 million mt and assume large S American corn harvests.
- US 2022/23 US soybean end stocks were raised to 255 million bu (+25 million) due to a 20 million bu reduction in exports, a 5 million reduction in seed use, and 5 million bu increase in imports and a 5 million bu increase in residual use. The stocks increase was seen as bearish with the June Stocks report calling for a 30-35 million bu in the residual, not just 5 million bu. The cash market seems to reflect tighter cash soybean stocks than is indicated by WASDE.
- US new crop soy stocks were forecast at 300 million bu due to an export cut of 125 million bu to 1,850 million bu and a 10 million bu cut in the crush to 2,300 million bu. The 2023 estimated US soybean crop was slashed 210 million bu due to the 4 million acres of lost seedings. US 2023/24 soybean end stocks fell to 300 million bu, down 50 million bu from June, but well above the average trade estimate of 200 million bu. The average farmgate soybean cash price is estimated by WASDE at $12.50/bu.
- World soybean end stocks were forecast at 121 million mt, a decline of 2.3 million from June. We see strong support for Nov soybean futures below $13.00 while soyoil holds on a bull market on renewable diesel demand with support below $0.60/lb.
- USDA wheat data leans mixed, with US new crop US stocks larger than expected but with the global and exporter balance sheets tightening on lower production and near unchanged demand.
- US all wheat production was lifted 74 million bu as harvested area was boosted 600,000 acres following NASS data in late June. Winter wheat yield was slightly higher amid late season rainfall across the Plains and favourable SRW conditions into harvest. Feed use was increased 20 million bu to account for larger than expected feed/residual disappearance in 2022/23, and end stocks are pegged at 592 million, vs. 562 million in 2022/23, and up 12 million bu year on year. We do note that NASS’s initial spring wheat yield estimates are below last year across the Dakotas and MN. Additional downgrades are likely if current weather forecasts there are proven correct. By class, 2023/24 HRW stocks are estimated at 227 million bu, vs. 232 million last year. SRW stocks are estimated at 129 million, vs. 90 million last year. HRS stocks are estimated at 155 million bu, vs. 158 million last year.
- However, total exporter production in 2023/24 was lowered 4 million mt from June, with larger US output unable to offset a combined reduction of 6.5 million mt in Europe, Canada and Argentina. We fear that additional cuts will be made to yield in Canada. Exporter stocks/use this month is pegged at 13.5%, vs. 14.6% in June. The global wheat balance sheet is tight.
- Corn remains the bearish anchor of the ag space until harvest combine data is available, but overall, we caution against chasing large daily moves as warmer/drier Central US weather is probable in the second half of July. Wheat and soy balance sheets lean bullish in the long run.