October WASDE holds a mixed bag for the grain markets
The October World Agricultural Supply and Demand Estimates increased yields for both soybeans and corn but reduced domestic and world supplies of wheat.
The October World Agricultural Supply and Demand Estimates were bearish for the row crop sector but positive for wheat.
The U.S. Department of Agriculture increased soybean yield by nearly 1 bushel per acre over September to 51.5 bushel per acre in the report issued on Tuesday, Oct. 12. The largest production changes are for Iowa, Minnesota and Nebraska. Harvested acres were left unchanged from last month at 86.4 million acres but production was increased to 4.448 billion bushels which was up 74 million bushels from September.
However, with the increase in carry in from the September quarterly stocks that pushed ending stocks to 320 million bushels, which is a 135 million bushels increase.
“The trade reacted negatively because the assumption is that yield will increase in future reports and that big crops get bigger,” said Shawn Hackett with Hackett Financial Advisors.
However, he thinks China will come in and buy U.S. soybeans on the break, which will help stabilize prices.
World stocks on soybeans were also raised by 5.7 million metric tons to 104.6 million metric tons, although USDA left Brazilian production estimates unchanged at 144 million metric tons and lowered Argentina’s crop estimate by just 1 million metric tons to 51 million metric tons.
USDA increased national corn yield by just .2 bushels per acre to 176.5 bushels per acre. However, some in the trade had expected a decline in the yield due to disease issues that had been reported in parts of the eastern Corn Belt. While this was the first report of the season to use actual field data, Hackett thinks the corn yield number will come down in the future.
“We think national corn yield is going to end up between 172 to 173 bushels per acre. U.S. corn production was increased to 15.019 billion bushels which was only a 23 million bushel increase from September, but again with the increase in quarterly stocks the 2021-22 carryout was hiked by 92 million bushels to 1.5 billion bushels.
World stocks were also raised by 4.1 million metric tons to 301.7 million metric tons.
“Longer term stronger wheat prices will eventually pull corn higher but right now corn is being anchored by lower soybean prices,” Hackett said.
Hackett also believes the acreage battle will heat up and drive corn prices higher to attract acres with the spike in fertilizer prices.
Wheat numbers were bullish with a reduction in domestic and world supplies, unchanged exports and decreased ending stocks. U.S. supplies were reduced primarily on lower production from the NASS Small Grains Summary, issued Sept. 30. Supplies were also lowered on reduced imports, down 10 million bushels, and lower feed and residual use by 25 million bushels to 135 million. USDA anticipates significantly reduced supplies of hard red spring, durum, and white wheat for 2021-22 will curtail feed and residual use for the remainder of the marketing year along with the continued large price premium of wheat over corn. Exports are unchanged at 875 million bushels, but there are offsetting by-class changes. Projected 2021-22 ending stocks were reduced 35 million bushels to 580 million, which are the lowest U.S. ending stocks since 2007-08.
World wheat carryover was also lowered for the current marketing year by 6 million metric tons to 277.2 million metric tons and are the lowest since 2016-17 with Iran, the United States, and Australia accounting for most of the reduction.
Hackett said the numbers are very bullish for the wheat market and he expects prices will continue to move higher.
“The squeeze play by commercials looking for the high-quality milling wheat hasn’t even started yet, and that could mean some explosive markets ahead, especially if production issues and export curtailment continue in Russia,” he said.