The July World Agricultural Supply and Demand Estimates (WASDE) from USDA isn’t a major market moving report historically, and the latest report was no different. With no major surprises in USDA’s latest adjustments to balance sheets, commodity prices continued to see double-digit losses Tuesday.
The focus of the markets remains on weather forecasts and if recession concerns will continue to impact money flow in the major U.S. commodities. Even with the forecast for hot and dry weather into August, September corn was down 34 cents mid-day, and the August soybean contract was 50 cents lower.
With an update to both domestic and world demand and supplies, USDA’s July report shows:
- Higher U.S. corn supplies and ending stocks
- No change to U.S. corn yield
- Lower domestic soybean production
- No change to U.S. soybean yields
- Third-highest abandonment of U.S. cotton acres on record
- A boost to South American supplies
- Increase in U.S. wheat supplies due to higher yields and harvested area
Corn Production Increased on More Acres
USDA increased its new crop corn production forecast by 45 million bushels. The move was tied to USDA’s most recent acreage report that showed farmers planted 89.9 million acres of corn this year, up slightly from the 89.4 million penciled in the March report.
USDA didn’t touch the national average corn yield estimate of 177 bu. per acre. The agency raised beginning stocks by 25 million bushels due to reduced feed and residual use, and ending stocks were also increased by 70 million bushels.
The latest report also made adjustments to global supplies, reducing both production and use. USDA reduced corn production in Russia, EUA and Kenya, but raised its forecast for Paraguay’s corn yields and acres. Even with discussion of a potential record safrinha corn crop in Brazil, USDA didn’t increase its corn production forecast for Brazil or Argentina.
Shrinking Soybean Production Forecasts
The July WASDE report indicates U.S. soybean production will fall 135 million bushels this year to 4.5 billion bushels. The reduction is partially due to USDA’s June acreage report showing fewer soybean acres across the U.S., with the latest forecast falling to 87.5 million planted acres this year. USDA didn’t touch its soybean yield estimate in July.
The latest look at soybean demand shows a 10 million bushel reduction in soybean crush, soybean exports down 65 million bushels due to lower U.S. supplies. The sharp reduction to soybean exports did raise questions by market analysts.
“I think one of the things that the USDA was forced in a corner to do was cut the demand for new crop soybeans, because of the acreage number that we got in June,” says Brian Splitt of AgMarket.Net. “They had to put that into the balance sheet on this report. And in doing so, that reduced production substantially.”
USDA showed an increased in South American supplies. USDA bumped Argentina’s crop up to 44 million metric tons (mmt), but left Brazil’s crop production forecast unchanged.
Where’s the Cotton?
Cotton prices have been in a free-fall this past month, with economists saying the fundamentals still haven’t changed as U.S. farmers could see a dramatic drop in harvested acres due to drought. USDA’s latest report served as a reminder of just how brutal the ongoing drought is for U.S. farmers, especially across the Southern Plains.
#WASDE raised assumed abandonment to 31.5% for U.S. #cotton. The last time they made a similar pre-August adjustment in their assumptions was 2011. Prod'n=15.5Mb, Exports=14Mb, and Ending Stocks=2.4Mb.
— John Robinson (@aggie_prof) July 12, 2022
USDA’s forecast for the 2022/2023 cotton crop shows higher planted acres, but abandonment is now forecast to be the third highest on record at 31.5%. With a bite out of harvested area, USDA thinks the U.S. cotton crop could fall 1 million bales. USDA also decreased exports by 500,000 bales, as well as ending stocks by 500,000 bales.
Cottonseed hulls are a feed source for dairy cows. With such high abandonment, along with drought impacting silage in areas of Texas and the Western U.S., there’s also concern about what it will mean for feed availability on U.S. dairies.
World Wheat Supplies
As the world keeps a close eye on wheat supplies, USDA is now forecasting larger U.S. wheat supplies for the 2022/23 crop, as well as an increase in domestic demand and exports. USDA increased U.S. wheat supplies by 44 million bushels based on a bump in harvested acres and higher yields.
“The first 2022 survey-based production forecast for other spring and Durum indicated a large increase from last year’s drought-reduced output at 503 million and 77 million bushels, respectively. Winter wheat production is also forecast higher at 1,201 million bushels on an increase in harvested area,” USDA’s WASDE report stated.
World wheat production was decreased for the EU, Ukraine and Argentina, but increased in Canada and Russia. In total, USDA now forecasts a 2 million ton decrease in the EU crop mainly due to drought impacting the crop in Spain, Italy and Germany. USDA also factored in the expected reduction in the harvested acres across Ukraine. The agency dropped Ukraine’s wheat production forecast by 2 million tons to 19.5 million tons.
A reduction in feed and residual use in the EU and Ukraine also impacted world consumption of wheat. USDA lowered its wheat consumption forecast 1.8 million tons to 784.2 million.
