The October World Agriculture 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 (bpa). The largest production changes are for Iowa, Minnesota, and Nebraska. Harvested acres were left unchanged from last month at 86.4 million acres (ma) but production was increased to 4.448 billion bushels (bb) which was up 74 million bushels (mb) from September. However, with the increase in carry in from the September quarterly stocks that pushed ending stocks to 320 (mb), which is a 135 (mb) increase. Shawn Hackett with Hackett Financial Advisors says, “The trade reacted negatively because the assumption is that yield will increase in future reports and that big crops get bigger.” 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 (mmt) to 104.6 (mmt), although USDA left Brazilian production estimates unchanged at 144 (mmt) and lowered Argentina’s crop estimate by just 1 (mmt) to 51 (mmt).
USDA increased national corn yield by just .2 (bpa) to 176.5 (bpa). 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 (bpa). U.S. corn production was increased to 15.019 (bb) which was only a 23 (mb) increase from September, but again with the increase in quarterly stocks the 2021-22 carryout was hiked by 92 (mb) to 1.5 (bb).
World stocks were also raised by 4.1 (mmt) to 301.7 (mmt). Hackett says, “Longer term stronger wheat prices will eventually pull corn higher but right now corn is being anchored by lower soybean prices.” 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 September 30. Supplies were also lowered on reduced imports, down 10 (mb) and lower feed and residual use by 25 (mb) 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 (mb) 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 6.0 (mmt) to 277.2 (mmt) and are the lowest since 2016/17 with Iran, the United States, and Australia accounting for most of the reduction.
Hackett says 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 says.
