9 December 2022

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  • HEADLINES: USDA December report as advertised; Argentine weather offers a few weekend showers, otherwise dry.
  • The USDA December Crop Report held few surprises and the market’s attention quickly shifted back to S American weather and macro-economic trends. Corn, soybeans, and wheat are mixed at midday with limited reaction to USDA’s data.
  • The USDA raised 2022/23 US corn end stocks by 75 million bu to 1,257 million bu due to the sluggish export pace since the start of the crop year. US corn sales are down 48% and Brazil, Argentina and Ukraine continue to undercut US Gulf fob offers. USDA dropped their 2022/23 corn export estimate to 2,075 million bu, down 396 million bu from last year. We would argue for additional cuts in US 2022/23 corn exports to 1,950 million bu which will further raise stocks. WASDE made no change in the US corn ethanol grind, but a drop of 50-75 million bu is indicated in 2023 due to slowing US gasoline consumption.

 

US End Stocks (million bu)
                                     Nov        Dec
                    2021/22    2022/23    2022/23
Corn            1,377        1,182        1,257
Soybeans        274        220          220
Wheat              669        571          571
  • The average annual farmgate price of corn fell $0.10/Bu to $6.70. Spot Chicago futures are trading well below this price on the lack of an export demand driver. USDA will update US corn yield/production in its January assessment.
  • In world corn supplies, the USDA left its Brazilian corn estimate at a record 126 million mt with Argentina at 55 million. Argentina can plant its second corn crop well into January, as farmers await needed rain. European corn imports were raised to 21.5 million mt while Chinese corn imports were left at 18.0 million mt. World corn end stocks fell slightly to 298.4 million mt, down 2.4 million from November.
  • US 2022/23 soybean end stocks held steady with November at 220 million bu. USDA made no adjustments to the balance sheet with the annual average farmgate price estimated at $14.00. WASDE did cut 2022/23 US soyoil imports by 200 million pounds and cut exports by 200 million pounds to 1,100 million pounds while reducing biofuel use by 200 million pounds to 11,600 million pounds. US soyoil end stocks are projected at 1,901 million pounds, up 42 million pounds from November. The soyoil stocks increase was far less than expected and considered bullish. We would argue that the WASDE estimate on US renewable diesel production is too low. No changes were offered to the US 2022/23 soymeal balance sheet. The 2023 Brazilian soy harvest was estimated at a record 152 million mt while the Argentine harvest was unchanged at 49.50 million mt. World soybean end stocks were forecast at 102.7 million mt, up 7.1 million from 2021/22. Fundamentally soybean/meal values are bearish.
Global End Stocks (million mt)
                                     Nov        Dec
                    2021/22    2022/23    2022/23
Corn            307.7         300.8        298.4
Soybeans      94.7         102.2        102.7
Wheat          276.3        267.8         267.3
  • US SRW exports were lowered 10 million bu. Combined HRS and white wheat exports were raised a like amount, and otherwise the US wheat supply and demand was left completely untouched. Stocks are estimated at 571 million bu. The season’s average cash price is $9.10, vs. $9.20 in November. Pace analysis suggests the USDA’s 2022/23 US wheat export forecast correct, and it is difficult to be overly bearish of US export demand given USDA already projects the US’s share of world trade at a record low 10%.
  • Global wheat leans slightly bullish. Russian production was unchanged at 91 million mt. Australian production was lifted 2.1 million mt following ABARES report on Monday. However, this was more than offset by a combined reduction in Argentine/Canadian stocks worth 4.2 million mt. Argentine output is pegged at just 12.5 million mt, which is aligned with yields to date, and exports will be no larger than 7.5 million mt vs. 16.3 a year ago. Argentine wheat stocks/use will drop to just 6.8%, the lowest since 2017/18. Combined exporter stocks/use was lowered to 13.5% vs. 13.7% in Nov and 15.0% in 2021/22. The world wheat balance sheet is tight despite record Russian production and exports.
  • USDA’s December WASDE is never exciting nor market changing. Focus returns to the duration of heat/dryness across Argentina and in the long run corn/soy price determination will be based on whether larger yields in Paraguay and Brazil offset losses in Argentina. An extension of heat/dryness in Argentina into mid/late January would be important, but rallies require significant adverse Brazilian weather.
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