WASDE brings out the bears
Jul 12, 2022
Afternoon report: Corn, soybeans and wheat all face sharp cuts on Tuesday
USDA released its July World Agricultural Supply and Demand Estimates report this morning, and a set of generally unhelpful data triggered a round of technical selling that pushed grain prices substantially lower. Corn futures were hit the hardest after tumbling more than 6% lower. Most wheat contracts lost 4% to 5% today, while soybeans slid 3% lower. Click here for our exclusive coverage and analysis of today’s report.
Not much rain is expected across the central U.S. between Wednesday and Saturday, although a very small part of the upper Midwest could gather up to 1” over the next three days, per the latest 72-hour cumulative precipitation map from NOAA. The agency’s 8-to-14-day outlook predicts more seasonally dry weather for much of the Midwest and Plains between July 19 and July 25, with widespread hotter-than-normal conditions likely during this time.
On Wall St., the Dow trended 41 points higher in afternoon trading to 31,214 as investors seem to be in a pattern of reevaluating risk in the stock market versus safer bets such as bonds. Energy futures tumbled substantially lower. Crude oil crumbled nearly 8% lower to $95 per barrel on lingering demand concerns. Diesel dropped 35, with gasoline down more than 5.5%. The U.S. Dollar firmed fractionally.
On Monday, commodity funds were net buyers of corn (+5,500), soybeans (+5,000) and soyoil (+4,000) contracts but were net sellers of soymeal (-2,000) and CBOT wheat (-12,500).
Corn prices eroded steadily through Tuesday’s session following USDA’s bearish supply and demand data that the agency released this morning. Spillover weakness from other grains and energy prices created additional headwinds today. July futures lost 49.25 cents to $7.32, with September futures down 42.75 cents to $5.9425.
Corn basis bids were mostly steady across the central U.S. on Tuesday but did move as much as 5 cents higher at an Illinois river terminal and as much as 3 cents lower at an Illinois ethanol plant today.
USDA’s outlook for corn in today’s WASDE report assumes larger supplies and higher ending stocks. Beginning stocks moved 25 million bushels higher, which the agency attributes to reduced feed and residual use, as indicated in its Grain Stocks report at the end of June. Production for 2022/23 moved 45 million bushels higher, mostly matching analyst estimates of 14.520 billion bushels. USDA left yield estimates unchanged, at 177.0 bushels per acre. The season-average farm price slid 10 cents lower, to $6.65 per bushel.
Corn quality was largely steady last week, with 64% of the crop rated in good-to-excellent condition through Sunday. Another 26% was rated fair (down a point from a week ago), with the remaining 10% rated poor or very poor (up a point from a week ago). Physiologically, 15% of the crop is now silking, and 2% has reached the dough stage.
China is anticipating record-breaking corn yields in the 2022/23 season, despite some localized flooding that occurred last week. Total production is expected to reach 10.730 billion bushels.
South Korea purchased 2.7 million bushels of animal feed corn from optional origins (likely sourced from South America or South Africa) in a private deal that closed earlier today. The grain is for arrival by mid-November.
Preliminary volume estimates were for 403,649 contracts, trending moderately higher than Monday’s final count of 352,425.
Soybean prices followed a broad set of other commodities lower today, although losses were not quite as bad as they were for corn and wheat. July futures dropped 48.25 cents to $15.9275, with August futures down 55.5 cents to $14.6650.
Soybean basis bids tilted 5 cents higher at an Iowa river terminal and 14 cents lower at an Ohio elevator while holding steady elsewhere across the central U.S. today.
USDA trimmed its soybean harvested area estimates by 2.6 million acres to 87.5 million acres. Because of that, the agency lowered its production estimates by 135 million bushels, for a new tally of 4.5 million bushels. Yield estimates are unchanged, at 51.5 bushels per acre.
Soybean quality took an unexpected dip lower, with 62% of the crop rated in good-to-excellent condition through Sunday (down one point from a week ago). Analysts were expecting to see ratings firm a point, in contrast. Another 29% of the crop is rated fair (up a point from last week), with the remaining 9% rated poor or very poor (unchanged from last week). Nearly one-third (32%) of this season’s soybean crop is now blooming, with 6% of the crop setting pods.
Brazil’s Anec expects the country to export 292.3 million bushels of soybeans in July, along with 2.173 million metric tons of soymeal this month. Anec also estimates that Brazilian corn exports will reach 246.2 million bushels in July.
Preliminary volume estimates were for 161,884 contracts, shifting moderately above Monday’s final count of 133,036.
Wheat prices incurred steep losses Tuesday after a round of technical selling pushed most contracts down 4% to 5%. Spillover weakness from other grains, plus a relatively strong U.S. Dollar, kept prices firmly in the red today. September Chicago SRW futures fell 45 cents to $8.1150, September Kansas City HRW futures dropped 50 cents to $8.6525, and September MGEX spring wheat futures lost 51.5 cents to $9.1225.
USDA raised its supply estimates for wheat by 44 million bushels to 1.781 billion bushels due to an uptick in harvested area and per-acre yields. The agency pegs winter wheat production at 1.201 billion bushels, plus another 503 million bushels for spring wheat. USDA also raised its export forecast by 35 million bushels to 800 million for the 2022/23 marketing year, noting that a recent decline in prices makes U.S. grain more competitive overseas. The season-average farm price slid 25 cents lower to $10.50 per bushel.
Spring wheat quality jumped 4% higher, with 70% of the crop now rated in good-to-excellent condition. Analysts were only expecting to see a one-point improvement. Another 25% of the crop is rated fair (down a point from last week), with the remaining 5% rated poor or very poor (down three points from last week). Physiologically, 44% of the crop is headed, which is well behind the prior five-year average of 77%.
The winter wheat harvest is nearly two-thirds complete after reaching 63% through Sunday. That’s up from 54% last week, and it’s also progressing a bit faster than 2021’s pace of 57% and the prior five-year average of 61%.
France’s farm ministry expects to see a 7% reduction in soft wheat production this season, due to some unfavorable weather and fewer planted acres. The ministry currently estimates soft wheat production at 1.209 billion bushels, which would be 5.9% below the prior five-year average, if realized. France is Europe’s No. 1 wheat producer.
Lebanon plans to import around 1.4 million bushels of wheat from Russia and Ukraine in a move to boost local supplies amid current shortages. Lebanon typically sources 60% of its imported wheat from Ukraine.
Preliminary volume estimates were for 87,001 CBOT contracts, which was slightly lower than Monday’s final count of 92,427.