August WASDE Friendly, Especially for Corn
The U.S. Department of Agriculture’s August World Supply and Demand Estimates held big bullish surprises especially for corn. The agency was aggressive in lowering yield nearly 5 bushels per acre to 174.6 (bpa). That pulled production down 415 million bushels (mb) to 14.75 billion bushels (bb). Ending stocks for the new crop marketing year were also dropped by 190 (mb) from last month to 1.242 (bb). Ted Seifred with Zaner Ag Hedge in Chicago says the cut to corn yields was a big surprise especially considering record yields are forecasted for Illinois, Indiana and Ohio verses lower yields in Minnesota and South Dakota than a year ago. “I am a bit skeptical of this number,” he says. However, he says it may signal further yield cuts moving forward and it does indicate prices need to go higher to price in the decrease. “The December corn contract has been in a wedge pattern and could technically have a bullish technical breakout here depending on how we trade for the next few session,” he says.
The USDA also reduced wheat production by 49 (mb) to 1.697 (bb) with much of the decrease coming from Hard Red Winter which was pegged at 1.319 (bb), plus white wheat was also dropped. The all wheat yield was lowererd 1.3 (bpa) to 44.5 (bpa). U.S. ending stocks were also lowered 38 (mb) from last month to 627 (mb). The bigger cuts were seen in the global balance sheets with world ending stocks for (21/22) being lowered to 279.1 million metric tons (mmt), which was a 12.6 (mmt) drop from July. Weather issues resulted from production cuts not only in the U.S., but most notably in Russia and Canada. Russia’s wheat production was lowered by 12.5 (mmt) and production in Canada dropped 7.5 (mmt) to 24 (mmt).
USDA was more conservative on soybean production cuts with yield lowered just .8 (bpa) to 50 (bpa). However, Seifred says, “The market is perceiving that if USDA is already lowering yield on soybeans at this early stage, there may be more cuts coming in future reports.” U.S. soybean production was lowered by 66 (mb) to 4.34 (bb), but new crop ending stocks ended up unchanged at 155 (mb). That is because the agency lowered crush and exports demand both by 20 (mb). Worlding soybean ending stocks were actually raised in the new crop category to 96.2 (mmt).
