- HEADLINES: USDA data raises US corn/soybean yields slightly; Leaves market to focus on South American weather into December.
- The USDA November Crop Report was slightly bearish with US corn/soybean yields rising slightly and suggesting that US summer row crops will get larger by the final NASS report in January. We maintain that the final 2022 US soybean yield will rise to 50.5 bushels/acre with corn rising to 173.5 bushels/acre. Favourable harvest weather limited yield losses and bumped up 2022 summer row crop yields.
- The yield gains are not sizeable, but important amid tight US corn/soy end stocks. Chicago futures fell post the report, but we doubt that any sharp break occurs until more is known about 2022/23 S American weather/crop sizes.
- WASDE estimated that 2022/23 US corn end stocks grew to 1,182 million bu, up 10 million bu from last month. Shockingly, WASDE left US corn exports unchanged at 2,150 million bu, even with US corn export sales running 50% behind last year. We would argue strongly for future corn export cuts.
- Illinois reported a record corn yield of 215 bushels/acre, up 5 from last month, with Indiana up 4 to 191 bushels/acre, and Iowa up 2 to 202 bushels/acre. It is just remarkable that IL could produce a record corn yield amid late seeding dates and the challenges of 2022 summer weather. The IL corn yield strongly hints that the 2023 US corn yield could easily score a new record above 180 bushels/acre with normality in summer growing conditions.
- USDA held their farmgate corn price at $6.80/bu with a stocks/use ratio of 8.3%. Such stock to use ratio argues that the upside in spot Chicago corn futures is limited to $7.00-7.20 without a dire S American drought.
- WASDE raised their 2022/23 US soybean end stock total by 10% to 220 million bu amid the rise in yield/production. The increase was due to a 0.4 bushels/acre jump in the US soybean yield to 50.2 bushels/acre. Iowa/Indiana soybean yields were raised 1 bushel/acre with Illinois left unchanged at 64 bushels/acre. We anticipate a further gain of 0.3 bushels/acre in the final US soybean yield to 50.5 bushels/acre in January.
- US 2022/23 soybean exports held steady at 2,045 million bu with the Brazilian soybean crop left unchanged at a record large 152 million mt. We would statistically argue that US 2022/23 soybean exports should decline amid the competitive position of S American new crop offers. China’s soy import estimate was left unchanged at 98 million mt with no change the use of US soyoil for biofuel. The WASDE report was viewed as slightly bearish and will not support spot Chicago futures above $14.75-15.00.
- USDA wheat revisions lacked surprises. US wheat end stocks were trimmed a modest 5 million bu amid higher projected feed use. This upward revision to consumption was weighted heavily toward spring and SRW. 2022/23 HRS stocks were lowered million bu to 124 million bu; SRW stocks were lowered 4 million to 87 million bu. HRW stocks were lifted 4 million amid lower projected seed disappearance. Exports were left unchanged at 775 million bu, as recall the US’s share of world trade in crop year 2022/23 will be a record low 10.4%. The season average cash price too was unchanged at $9.20/bu.
- Exporter wheat stocks/use, including Russia and Ukraine, was lowered fractionally, from 13.8% to 13.7%, vs. 15.0% in 2021/22. A 1.5 million mt hike in projected Aussie production was more than offset by a 2 million mt reduction in Argentina and a 450,000 cut to EU crop size.
- Non-Black Sea exporter stocks/use continues to sit at a record low, but whether this drives price discovery hinges upon the details of the coming export corridor extension and Russia’s ability to exceed expectations in finding new markets. Wheat data is viewed as neutral relative to current prices. Geopolitics will continue to dominate.
- US crop production is known. Weak US corn/wheat export demand caps rallies. A shift in global soy trade flows is imminent. All that is left is determining the pace of residual disappearance in the Sep-Nov quarter. The longer-term outlook for Chicago grain futures is becoming bearish amid slowing world export demand and improving weather across Brazil and Argentina.