30 September 2022

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  • HEADLINES: NASS report loses corn and finds soybeans; Wheat stocks as expected but US all wheat production declines.

Sep 1 US Stocks (million bu)

            2020        2021        2022

Corn            1,919        1,235        1,377

Soybeans        525        257        274

Wheat            2,158        1,774        1,776

  • The USDA September 1 Stocks Report was bullish of corn and slightly bearish of soybeans. US wheat stocks were right at last year and viewed as neutral.
  • Chicago is adjusting to the elevated risk of 2022/23 corn stocks declining near pipeline levels of 1,000 million bu with any drop in the US 2022 corn yield near or below 171 bushels/acre. Wheat/corn hold upside price risk as spot Chicago soybeans will struggle to rise above $14.50/bu. Beans have downside price risk to $13.00.
  • The USDA estimated 2022/23 corn end stocks at 1,377 million bu, down 148 million from the WASDE September forecast due to larger feed/residual use. 2022/23 US corn stocks are 142 million bu larger than last year, but a smaller 2022 harvest threatens 2023 US supply availability.
  • WASDE/USDA will raise their annual feed/residual corn use to 5,706 million bu as wheat feeding slumped and new crop sorghum supplies were limited. NASS did adjust the US 2021 corn harvest by edging yield and harvested acres lower. The 2022 corn crop was cut 41 million bu to 15,074 million.
  • The 148 million bu drop in old crop corn stocks will pull 2022/23 corn end stocks down to 1,071 million bu without any change in yield (172.5 bushels/acre) or demand. The cut in old crop corn stocks produces an historically low stocks/use ratio of 7.5%, and growing odds that corn prices will rise above $7.00 at some point.
  • We note that US farmers held 509 million bu of corn, a 29% increase from last year. It is difficult to understand why farmers held so much corn amid the cash premiums that were being offered. We look for corn prices to add upside premium to price just in case the US 2022 corn yield slides below 170 bushels/acre.
  • The 2021 US soybean crop was raised 30 million to 4,465 million bu with end stocks raised 34 million to 274 million bu. The larger old crop stocks were seen as bearish punishing Chicago values. Both yield and harvested acres were adjusted slightly higher. A year ago, US soybean end stocks were 257 million bu.
  • US 2022/23 soybean stocks will be raised by 34 million bu to due to the larger old crop supplies. The extra old crop supplies would raise 2022/23 WASDE soybean stocks to 234 million bu if yield (50.5 bushels/acre) and demand held steady. The extra soybean supplies would allow for new crop yield to slide near 50.0 bushels/acre without changing their current end stocks estimate of 200 million bu.
  • We see the extra old crop soybean stocks as slightly bearish on price and pressuring the July/November 2023 soybean spread. Rallies in spot Chicago soybeans will be capped.
  • NASS wheat data leans bullish. Final US wheat production in 2022 was lowered a surprising 133 million bu to 1,650 million, with winter wheat output down 94 million, spring wheat down 30 million and durum down 10 million relative to NASS’s early August estimates. US all wheat production will be near unchanged from last year, and this coupled with crop concerns in Argentina will keep the non-Black Sea exporter balance sheet extremely tight.
  • However, Sep 1 US wheat stocks totalled 1,776 million bu, right at the average guess, unchanged from last year. This implies Jun-Aug wheat feed disappearance of 109 million bu, vs. 254 million last year and the lowest on record.  USDA in its Oct WASDE is expected to cut annual wheat feed/residual 30-40 million to just 40-50 million bu. End stocks will be cut to 520-530 million bu, but like corn and beans, the issue for the market is whether current prices are adequately rationing supplies. This largely hinges upon Black Sea geopolitics and grain flows, and whether importer demand is forced to the US during the winter and spring. Newer highs are probable, but rallies should be rewarded.
  • Larger than expected US soy supplies are colliding with a slowing of export demand and mostly favourable weather in Brazil. Corn/wheat stay supportive amid escalating Black Sea risks and as the market must know final US corn yield before it knows whether $6.75-6.95 is properly slowing consumption.   Soybeans will be the ag market’s bearish laggard amid recent Argentine sales and non-threatening Brazilian weather. Corn is the bullish stalwart.
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