12 May 2023

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  • HEADLINES: Wheat soars and soybeans sag with corn caught in between; USDA report is mixed with shocking decline in US HRW wheat crop.
  • The USDA May Crop Report held something for everyone with US 2023 HRW wheat production down sharply from last year with the Kansas wheat crop at 191 million bu with total US HRW crop pegged at just 514 million bu, down 15 million bu from last year’s drought ravaged crop. WASDE decided to hold US corn and soybean old crop stocks nearly unchanged, while estimating 2023/24 US corn stocks at 2,220 million bu and soybeans at 335 million bu. The report was seen as bullish for wheat and neutral to slightly bearish for corn/soybeans.
  • WASDE estimated the 2023 US corn crop at 15,265 million bu on planted acres of 92 million and harvested at 84.1 million. The USDA used a record corn yield that follows trend at 181.5 bushels/acre. The prior record US corn yield was set back in 2021 at 177 bushels/acre. This year’s record corn yield forecast is 4.5 bushels/acre higher. WASDE cut 2022/23 US corn exports by 75 million bu to 1,775 million bu and made no other changes to the balance sheet arriving with an end stock total of 1,417 million bu. Based on the March Stocks report, we maintain that USDA is still 100-150 million bu too low on 2022/23 US corn feed use.
  • WASDE estimated the average 2022/23 US cash corn price at $6.60 and $4.80 for 2023/24. The lower new crop corn price would translate into a harvest low of $4.75-5.00 for December futures. July corn below $5.70 appears undervalued.
  • 2023/24 US total corn use was forecast at 14,485 million bu with exports of 2,100 million bu, domestic feed/residual use of 5,650 million bu and the US ethanol grind at 5,300 million bu. We maintain that 2023 US corn seeding will decline 800,000 acres with favourable weather needed to achieve a 181.5 bushels/acre final yield.
  • US 2022/23 soybean end stocks were forecast at 215 million bu, up 5 million from April due to 10 million bu increase in exports and 5 million bu boost in trade. The boost in trade is a surprise based on the competitive position of S America. However, WASDE did boost Chinese soybean imports to 98 million mt, up 2 million on a growing purchase pace from Brazil.
  • USDA forecast the average 2023/24 cash soyoil price at $0.58/pound amid crop year biofuel use expanding 900 million pounds. We see this as a too conservative US 2023/24 soyoil stocks are forecast to decline to 1,836 million pounds.
  • The 2023/24 world soybean end stock total of 122 million mt is decidedly bearish with Brazil producing a 163 million mt and Argentina a 48 million mt crop. Such crops are monsters and set a longer-term bearish price trend if realised. However, the focus in coming months will be on the 2023 US soybean crop. There will be weather scare rallies that offer new sales opportunities. Based on margins, we see a 163 million mt 2024 soy crop as excessive.
  • USDA wheat data was bullish. Old crop US stocks were left unchanged at 598 million bu, but 2023/24 end stocks were trimmed 42 million bu to a new 16-year low 556 million bu. NASS in its first official estimate pegged US winter wheat production at 1,130 million bu. Yield was down 7-22% year on year in TX, OK and KS. Yield loss is also forecast across the PNW amid lingering drought and weak crop ratings there. SRW yields are projected steady to slightly lower.
  • We note that US wheat end stocks in 2023/24 will be near pipeline, and this assumes exports of just 725 million bu, with the US’s share of world trade dropping to a newer record low 9.4%, vs. 9.8% in 22/23. There is little to no tolerance for supply dislocation in any other major exporting country. Wheat must stay out of feed rations with HRW end stocks in 2023/24 now projected to be 150-160 million bu, vs. 269 million in 2022/23 and the lowest since 2007/08.
  • 2022/23 major exporter wheat stocks were raised 3 million mt amid a slashing of domestic use in Europe and Russia, which was not unexpected. New crop exporter production is pegged at 382 million mt, down 12 year on year, with stocks falling 7.6 million mt to just 55.7 and stocks/use also estimated at a new 16-year low 13.8%. This assumes normal weather and even a modest contraction in global wheat consumption.
  • The USDA’s move to publish larger new crop corn and soy stocks and adjust EU/Russian wheat stocks higher allows focus to shift to actual old crop stocks and summer weather. Extreme volatility is expected in the coming months. Dryness in Canada and C Russia and developing dryness in the E Midwest need to be closely followed. And surprisingly, WASDE has yet to cut Argentine corn and soybean crop estimates.
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