• HEADLINES: Bearish 2023 HRS wheat surprise; US corn stocks below last year at 1,361 million bu; Soybean stocks 18 million bu larger than WASDE.

• Chicago ag markets are sharply lower following the USDA September 1 Stocks in All positions and final US 2023 Small Grain Production report. The surprise of the report was a larger than expected decline in final 2023 US corn stocks, and a larger than expected rise in US wheat production. US soybean stocks were slightly larger, but generally within trade expectations.

• NASS/USDA forecast 2022/23 US corn end stocks at 1,361 million bu, down 91 million bu from the September WASDE estimate and 16 million bu below the year prior stocks. We calculate the Q4 US corn feed/residual use rate at 696 million bu, down 81 million bu from last year, but far larger than had been forecast by WASDE. Fourth quarter US corn disappearance at 2.75 billion bu was 220 million bu less than the prior year due to sliding US corn export demand of 343 million bu. A year ago, the US exported 525 million bu or 181 million bu more corn. Most of the decline in Q4 US corn use was the drop in export demand. The 1,361 million bu defines 2022/23 US corn end stocks which places added importance on 2023 US corn yields. The US 2022 US corn crop was revised down 15.0 million bu on a further review with the 2022 yield pegged at 173.4 bushels/acre.

September 1 US Stocks (million bu)

            2021        2022        2023

Corn            1,234        1,377        1,361

Soybeans        257        274        268

Wheat            1,774        1,778        1,780

• NASS forecast 2022/23 US soybean end stocks at 268 million bu, up 18 million bu from the September WASDE. 2022/23 soybean stocks were down 6 million bu or 2% from last year. We calculate the Q4 US soybean residual at -125 million bu as NASS adjusted last year’s US soybean crop down 5.9 million bu with a yield of 49.6 bushels/acre. NASS adjusted 2022 US soybean harvested acres downwards to 86.17 million acres. The 2022 Q4 soybean residual last year was -123 million bu. The additional 18 million bu of 2022/23 soybean end stocks will be added in the next WASDE report. The 2022/23 US annual soybean residual is estimated the largest level since 2004.

• US wheat production data leans bearish in that NASS shocked the marketplace with a much larger spring wheat production number. Final US HRS production is pegged at 468 million bu vs. 413 million in July, and despite very weak crop ratings in August. Final HRW production is 601 million bu, vs. 585 million in July. Total US wheat production was lifted 77 million bu to 1,811 million. This compares to 1,650 million in 2022/23. Yet, KC and Minneapolis futures have been actively shedding premium in preparation of larger final yields. We doubt that 2023/24 US wheat end stocks will be raised by more than 5-15 million bu in USDA’s Oct WASDE due to larger than expected feed consumption.

• June-Aug wheat feed/residual disappearance totalled 219 million bu, up 80 million (58%) from the previous year. We expect USDA to raise annual feed/residual by 30-40 million bu. This along with better than expected export sales (relative to USDA’s forecast) keeps final US wheat end stocks at 615-625 million bu. The HRS balance sheet will loosen most compared to WASDE estimates in early September. Wheat futures have pushed to new lows on the decline with support in December Chicago wheat found under $5.50/bu.

• The midday GFS weather forecast is like the overnight run with limited Central US rainfall over the next 10 days. The best rain looks to drop across the Northern Plains and WC Texas. Midwest rains hold off until mid-next week on a frontal pass. A cool forecast is offered after October 7 with a frost likely across S Canada and the far NC Midwest.

• Red is the colour of Chicago pricing boards at midday amid bearish wheat data, a lack of bullish soy data, and as equity markets stay concerned about the rising likelihood the US government being closed on the weekend. Wheat must contend with an already opaque Black Sea market and the lack of future USDA data will leave cash traders even more in the dark. Otherwise, it is normal for spot Chicago soy to score its annual low in early October. Downside risk in corn is limited. Wheat is undervalued and oversold, with Paris milling contracts finding support at late August/mid-Sep lows. Gulf SRW this weekend will be quoted $5-6/mt below French origin. China is on holiday next week and US farmers will squirrel away their new crop harvest waiting for a Chicago rally and improvement in basis. Soyoil is the only Chicago grain that is not impacted by slowing export demand. Its bull story is rooted in demand via renewable diesel.

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