30 June 2023

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  • HEADLINES: Soybean seedings shock trade with 4-million-acre fall; Corn seedings rise 2.1 million acres; US corn stocks lowest since June 2013.
  • Chicago ag markets are sharply mixed following the June Stocks/Seeding report with soybean/wheat futures higher while the corn market sags on a bearish surprise on 2023 US corn seedings. This June report held something for everyone with the soybean market to be the bullish stalwart through summer while corn is the bearish anchor. The Chicago soybean/corn ratio is likely to move to a record level with the US needing an additional 4-6 million acres of soybean acres in 2024 to service the expanding US crush profile for soyoil.
  • US June 1 corn stocks came in lower than expected at 4,106 million bu with the third quarter feed/residual use rate calculated at 978 million bu, the third largest US on record. WASDE is understating US 2022/23 feed/residual use by 150-200 million bu which more than compensates for a 50-100 million bu reduction in 2022/23 US corn export demand due to Brazilian aggressive new crop export offers. US June corn stocks at 4,106 million bu are the lowest since 2013/14, and well below trade expectations. 2023 US corn seedings were well above expectations as farmers seeded additional corn from soybeans. US corn seedings were up 2.1 million acres from March intentions at 94.1 million acres. The US corn seeding gains were from the minor production regions.
  • The big change in US corn seedings came from TX (up 22%), LA (up 13.7%), and WA, up 12.5% from 2022. More modest was that IA corn seedings were up 1%, IL up 4.5%, North Dakota up 6.7% and S Dakota up 5.1%. OH corn seeding fell 1.4%. Using a US yield of 173.0 bushels/acre produces a US crop of 14,930 million bu. We would expect that WASDE will drop their July corn yield estimate by 5-10 bushels/acre.
  • The rise of 150-200 million bu of US corn feed/residual will offset the production gain of 330 million bu of extra production. We see support at $4.90-5.00 to underpin December corn unless you expect that yield will return to record levels above 177 bushels/acre or more. US crop ratings currently support a 171 bushels/acre yield.
  • US June 1 soybean stocks of 796 million bu were 172 million bu less than last year which confirms that NASS overstated last year’s harvest. The Q3 residual use for US soybeans is estimated at 72 million bu. We look for WASDE to increase their 2022/23 residual use to 50-60 million bu and adjust stocks downwards.
  • The bullish surprise is that US farmers planted just 83.5 million acres of soybeans this spring, well below trade estimates, and down 4.0 million acres from last year and the March Intentions. The drop in seedings cut US 2023 soybean production by 200 million bu which demands rationing in the new crop balance sheet. WI soybean seedings were off 8.7%, IL down 7.4% and MO off 6.7%. The big drop was ND being off 13.7%. US soy demand must be cut dramatically to allow 200 million bu of 23/24 end stocks. Soyoil is the bullish stalwart biofuel demand.
  • NASS’s US wheat stocks and acreage date leans neutral to slightly bullish. Most importantly, total 2022/23 feed/residual use is calculated at 77 million bu, vs. USDA’s projected 50 million and some 30 million above the trade’s expectations. Final 2022/23 US end stocks are 580 million bu, vs. USDA’s 601 million, and all wheat production is unlikely to change in USDA’s July WASDE, new crop wheat end stocks are likely to drop to 540-550 million bu. Ultimately, the risk is that US all-wheat stocks decline to 505-520 million bu, and the burden on spring wheat yield performance in the US and Canada has been elevated.
  • Total 2023 wheat acreage was lowered 300,000 acres to 49.6 million. Relative to March intentions, winter wheat seedings were trimmed 500,000, mostly HRW. Durum acres were lowered 300,000 (17%). Other spring wheat acres were raised 570,000 acres, with planted area in ND up 400,000. The US HRW balance sheet will be tightening further, and USDA in July is expected to put US HRW end stocks at 135-145 million bu, vs. 264 million in 2022/23. SRW stocks are estimated at 115-120 million, vs. 88 in 2022/23. HRS stocks are estimated at 170 million, vs. 151 million in 22/23.
  • US wheat and soy balance sheets stay historically tight, even assuming contraction in export demand, while the US corn balance sheet will be fluid into harvest. We believe that all national yields between 165-175 are on the table amid a mix of the historic coverage of drought currently, coming soaking rainfall but also severe weather, wind, and hail. December’s corn downside is limited below $4.75-5.00 during the harvest.
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