May WASDE shows lower wheat production but much higher corn and soybean production

The May World Agricultural Supply and Demand Estimates report was a positive for wheat markets and a negative for the corn and soybean markets, Randy Martinson of Martinson Ag Risk Management and Randy Koenen of the Red River Farm Network discussed on the May 12 Agweek Market Wrap.

Martinson said wheat got a boost because of "a lot higher abandonment" of hard red winter wheat than even had been expected due to drought conditions. Abandonment was 24% last year and is estimated this year at 33%.

"That brought production down a lot more than predicted by the trade," he said.

That was particularly good news for the Kansas City wheat market, but he said spring wheat production also was decreased.

But corn and soybeans saw opposite momentum, with big yield increases for the U.S. paired with already predicted boosts in acreage.

"That really bumped up our production," Martinson said. "I think this is the highest numbers you're going to see for the year for the U.S."

But big increases also are predicted in South America, with the world numbers "staggering," he said. Whether the increases will be realized is yet to be seen, but he said USDA had to "put a number out there."

"The numbers were pretty daunting when you looked at it for ending stocks estimates," he said.

Koenen pointed out that the U.S. and South American numbers at this point consider ideal planting conditions, without factoring in prevented planting or lack of timely planting, abandonment or other issues. And Martinson said the late planting issue definitely could be a factor in the northern Plains, where wet conditions continue to hold off much planting progress.

Every corn acre that doesn't get planted "takes off 180 bushels" from the expected ending stocks, Martinson said.

However, he cautioned that 2022 conditions were similar and a lot of corn got planted after May 20.

"And decent yields last year," Koenen said.

So, Martinson said time will tell whether the USDA numbers will come true.

On the wheat side, the Wheat Quality Council's winter wheat tour is scheduled for next week, which they expect will reveal whether USDA is on as far as winter wheat goes. Martinson and Koenen said it's possible some of that wheat ground already has been planted to other crops, with soybean a likely choice.

More soybeans on expected wheat ground could further push bearishness on the soybean market, and Koenen and Martinson said ground expected for corn or wheat in the northern Plains also could end up in soybeans.

Another shot of bearishness Martinson could see was rain in the Corn Belt.

"A little bit of rain is a little bit negative for that market as well," he said.

But the eastern Corn Belt has had virutally no issues this year, which he expects could be part of the reason for the uptick in expected yields.

Depressed grain markets were part of the factor in firmer livestock markets, Koenen said. Martinson said beef production is expected to be trimmed both this year and next. And the hog market also has stabilized somewhat, though Martinson said Prop 12 being upheld by the U.S. Supreme Court could cause problems for hog producers. In the long run, he said the law implementation may lead to farrowing delays and decreases and an overall reduction in herd numbers, which could push prices higher given demand.

Going forward, Martinson thinks northern Plains weather is going to be the thing the market has its eyes on. More rain could further slow down planting and could lead to even more concerns about what acres get planted.

"We're the trouble spot," he said.

And, since Martinson was wearing his Duke & Duke shirt from the 1983 commodity trading comedy Trading Spaces, Koenen couldn't resist asking about orange juice futures.

"The orange juice market looks favorable," Martinson confirmed.

(The Agweek Market Wrap is sponsored by Gateway Building Systems.)