A Couple of Surprises in the WASDE and Crop Production Reports

The USDA released its World Ag Supply and Demand Estimates and updated Crop Production Reports last week. Joe Vaclavik, founder and president of Standard Grain, talks about the biggest surprise in last Friday’s reports.

“I think the soybean yield number was the biggest surprise, that USDA raised that national yield estimate for soybeans rather than reduce it. USDA has penciled right now that six different states will have record soybean yields this year. It’s Illinois, Indiana, Ohio, North Carolina, Mississippi, and a couple of other ones are penciled to have record soybean yields this year. So, there’s a lot of good stuff out there that USDA says is going to offset a lot of the bad stuff. So, that 51.9, if realized, that’s tied for the biggest soybean yield we’ve ever had nationally, 2016 with that exact number, 51.9.”

The updated corn yield number was not surprising. “Corn yield number was down. It was lower, as expected. A little bit lower than expected, as a matter of fact, but not surprising, necessarily.”

Another surprise took place in the wheat markets, particularly when it comes to exports.

“They actually raised their wheat export estimate, which is interesting because the book of wheat sales for the current market year’s like the second worst of the last 10 years. We’ve had high prices, and we had some crop issues here in the last couple of years. I was kind of surprised by that. You’re wheat carryout number for the United States came in about as expected, and then they moved some of the Ukraine-Russia stuff around. We just need to find some demand for wheat. It’s funny, you look at the wheat market now and the way it’s set up, It’s like we’re back in January, February, like pre-Russia-Ukraine. The funds are short again, the markets back down to pre-invasion levels is what I call. It’s like you can just erase those four or five months from your memory, and it’s like, okay, we’re kind of back to where we started.”

He says it’s hard to tell if there will be a chance to boost U.S. wheat exports.

“Regarding wheat, it’s a fluid situation because you do have this deal in Ukraine, and they’re starting to ship some grain out. How long does that last? Does it get interrupted at some point? I don’t know. We don’t have the wheat to export that we typically would because we had a late crop last year, spring wheat was really bad, and HRW wheat wasn’t great. I kind of feel like if we could find some footing in the row crops here, we’d probably see some upside in the wheat market. I know the spring wheat crop, they say, is really good this year, at least a hell of a lot better than last year, which was a disaster, of course. Wheat’s been a follower. I mean, it’s just been sideways to doing nothing while row crops have a little bit more action. But for all the news out there in the world, with the Black Sea, food shortages, which is kind of a hyperbolic headline, the wheat market’s awfully quiet.”

He talks about USDA’s stocks numbers. “USDA fiddled around with their numbers a little bit. You had changes to the production numbers, and then you did have some changes on the demand side of the US balance sheets too. USDA reduced its old-crop demand estimate for both corn and soybeans in the United States on the domestic balance sheet, which leads you to larger carry-in numbers which will go on the new-crop balance sheet. So yeah, they’re talking to reduced demand to some extent and for old-crop, that’s reality. They’re trying to fine-tune their estimates because the marketing year ends here in two weeks. For new-crop, it’s all guesswork. They’re trying to predict what the demand is going to be in a marketing year that doesn’t start for another two weeks. You gotta get through South American growing seasons, you gotta get through a lot of stuff to figure out those demand numbers, so they’re educated guesses.”