The June 2023 World Agricultural Supply and Demand (WASDE) report was, as expected, not a big market mover. Prior to the report, the markets were trading in the same direction as they traded after the report was released. The report was neutral to bearish for corn and soy, with exports on both lowered, and, for wheat, increases in foreign production raised global ending stocks enough to set a bearish tone.
Traders had expected a slight reduction in U.S. corn exports to account for the slow pace so far in 2022-23, with export sales still down 33% from a year ago. The cut in exports turned out to be more than expected, at 50 million bushels (mb), partly offset by lower imports. The Dow Jones survey had an average estimate of 1.446 billion bushels (bb) for the 2022-23 endings stocks, and it turned out that number came in higher, at 1.452 bb, increasing beginning stocks for 2023-24, and sending the new-crop carryout to a higher-than-expected 2.257 bb -- 35 mb higher than the estimate.
With traders looking for a modest reduction in yield of 0.3 bushels per acre (bpa) for corn, and 0.1 bpa for soybeans, USDA chose not to cut yield and production at all, despite three to four weeks of very dry weather. There were no other changes for the U.S. balance sheet, with the report leaning slightly bearish. The average farm price for corn was left unchanged at $4.80 per bushel.
On the world front, Brazil corn production was raised higher than most expected, at 132 million metric tons (5.19 bb) -- a new record, and up 2 mmt from May. Argentine corn production was lowered by the same amount, to 35 mmt (1.38 bb), and about a half million tons lower than the trade had guessed. Ukraine corn production for 2023-24 was raised by 2.5 mmt to 22.5 mmt (886 mb), and EU corn imports were increased by 2.5 mmt to 22.5 mmt (886 mb). Ukraine, Brazil and South African corn exports were increased, while U.S. and Argentine exports fell. For 2023-24, world ending corn stocks were increased by 1.1 mmt to 314 mmt (12.36 bb) -- a neutral to slightly bearish change, up 16.5 mmt (649 mb) from the 2022-23 stocks.
The Dow Jones survey prior to the report release expected only a modest increase in soy ending stocks. The 15 mb reduction in 2022-23 exports was a bit of a surprise, sending ending stocks in the U.S. up 15 mb, to 230 mb. That higher beginning stocks number translated directly to the new crop (2023-24) ending stocks of 350 mb -- about 14 mb higher than the trade estimate. As in corn, both soybean yield and production were left unchanged at 52 bpa and 4.510 bb, leaving the balance sheet change at a slightly bearish influence.
On the global front, the focus seemed to be on South American production changes. As expected, Brazil moved higher by 1 mmt to an all-time record-large 156 mmt (5.73 bb), but Argentine soy production was only dropped 2 mmt to 25 mmt (918 mb). This is still roughly 3 mmt (110 mb) higher than both major exchanges in Argentina see things. Argentine crush was lowered by 500,000 mt to account for the lower crop. With the trade looking for a decline of 800,000 mt in global ending stocks, it actually increased by the same amount to 123.3 mmt (4.53 bb) -- slightly bearish.
Soybeans were trading higher prior to the report, and despite a neutral to even bearish report, advanced those gains by the close.
Wheat had the most changes in Friday's USDA report. All wheat production was pegged at 1.665 bb -- in line with the estimate -- with hard red winter up 11 mb from May, soft red winter production down 4 mb and white wheat little changed. U.S. ending wheat stocks rose a modest 6 mb from May, but about 6 mb less than the trade had figured. Wheat yield was increased by 0.2 bpa, to 44.9 bpa, to account for recent rain relief.
It was on the world front where some changes were significant ... and bearish. On the production side, EU was raised 1.5 mmt to 140.5 mmt (5.16 bb), Russia production was boosted by 3.5 mmt to 85 mmt (3.12 bb), and India, by the same amount to 113.5 mmt (4,17 bb). Ukraine wheat production was increased by 1 mmt to 17.5 mmt (643 mb). China wheat production was virtually unchanged despite serious flooding in the past few weeks, but China's wheat imports were raised 1.5 mmt to 12 mmt (441 mb), and feed use of wheat was boosted by 2 mmt to 34 mmt (1.25 bb). Russian and Indian wheat feed use rose by 1 mmt and 500,000 mt, respectively. On the export side, Russian exports rose by 1 mmt to 46.5 mmt (1.71 bb), while both Ukraine and the EU wheat exports were increased by 500,000 mt. With traders expecting little change in global ending stocks, the changes above resulted in about a 6.5 mmt increase to 270.7 mmt (9.95 bb) ending stocks -- slightly bearish. While Kansas City wheat was trading about a dime lower prior to the report, a late-day rally nearly cut the loss in half.
The June WASDE, as typical, was not a big market mover and had few changes. Traders will now likely turn their focus back to weather issues, both here and around the world. The lack of change in yield and production for corn and soybeans, though not a surprise, will require good rains to start falling as the weather in the past three to four weeks has been abnormally dry.
At the end of the day, KC July wheat finished 7 cents lower, while Chicago was higher and Minneapolis little changed. July corn finished 6 cents lower, but just 2 1/2 cents down for new-crop December. Soybeans and bean oil rose to solid gains by the end of the day, with spot July beans up more than 23 cents and November up 15 1/4.
Dana Mantini can be reached at email@example.com
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