Tighter stocks for corn, slightly higher stocks for soybeans & new crop wheat production increases were the notable changes in this month’s World Agriculture Supply & Demand Estimates (WASDE) report from the USDA.

Summary by Crop

Wheat

  • Projected 2020/21 US wheat exports increased by 20 million bushels, resulting in lower beginning stocks for 2021/22 US wheat. Although beginning stocks fell, 2021/22 projected yields were increased slightly to 50.7 bushels/acre due to better winter wheat yields, which resulted in higher production and higher total supply.
  • The USDA raised their European wheat production forecast for the 2021/22 crop. The European Union’s estimated production was raised 3.5 Mmt, Russia’s estimated wheat production was raised 1 Mmt and Ukraine’s estimated production was raised 0.5 Mmt. For context, expectations for European wheat production are much higher in 2021 compared to 2020. Combined production for the three European regions discussed is estimated at ~253 Mmt in 2021 vs ~237 Mmt in 2020.
  • The increase in global production for 2021/22 was only partially offset by increased consumption forecasts, which resulted in projected global ending stocks rising by ~1.8 Mmt. China continues to hold nearly half of the global wheat stocks.

 

Corn

  • The USDA made two key changes to their US old crop (2020/21) corn demand forecasts. First, projected corn use for ethanol was raised by 75 million bushels, and second, projected corn exports were raised by 75 million bushels. This resulted in a 150 million bushel increase to US corn demand. Projected US ending stocks fell by 150 million bushels, which lowered 2020/21’s stocks-use-ratio to 7.4%. The projected 7.4% stocks-use-ratio is now tied with 2012/13 as the second lowest on record, only higher than 1995/96’s 5.0% ratio. Keep in mind just one year ago the 2020/21 corn stocks-use-ratio was projected at 22.5%, an incredible shift in such a short time.
  • Other changes to note were Brazil’s 2020/21 estimated corn production. Harvest is now underway for this crop, and yields are expected to be much lower than initially anticipated due to the significant drought in southern Brazil. The USDA lowered their Brazilian corn production estimate from 102 Mmt to 98.5 Mmt, and we suspect that this could go lower in future WASDE reports, as many analysts have projected Brazilian corn production in the low 90 Mmt range.

 

Soybeans

  • The only change to the US soybean supply and demand balance sheet was to projected old crop (2020/21) crush demand, which was lowered by 15 million bushels. This resulted in old crop ending stocks increasing by the same amount, which carried forward into the new crop (2021/22) ending stocks.
  • Projected Brazilian 2020/21 soybean production was raised 1 Mmt. All projections for China were unchanged.
Commodity Conversations

What does it mean?

In the hours post WASDE 2021 spot corn futures rose ~8 cents due to the projected tighter ending stocks. Spot soybean futures traded down ~18 cents/bushel due to the higher ending stock projections for both old and new crop soybeans. Spot wheat futures were up ~1 cent/bushel. All in all, today’s WASDE provided neutral information for the market, traders are likely now to focus on weather and if the dryness in the US Midwest will continue.

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Key Points

  • 2021/22 wheat global ending stocks estimates increased by 1.8 Mmt.
  • Brazilian corn harvest is underway, and yields are expected to be much lower than initially anticipated.
  • Higher soybean ending stocks expected.

Click on graph to expand

Data sources: USDA, Nutrien, Mecardo

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