PF Report Reaction: USDA unexpectedly cuts soybean crop estimate

USDA’s 2022-23 ending stocks forecasts came in higher than expected for corn and wheat, while projected carryover was lower than traders anticipated.

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Market reaction

Ahead of USDA’s reports, corn futures were trading around a penny lower, soybeans were 2 cents lower to a penny higher, wheat futures were 6 to 10 cents lower and cotton was around 120 points lower.

As of 11:30 a.m. CT, corn futures are trading around a nickel lower, soybeans are mostly 12 to 18 cents higher, wheat is 10 to 19 cents lower and cotton is around 350 points lower.

U.S. crop production

Corn: 13.895 billion bu.; trade expected 13.885 billion bu.
— compares to 13.944 billion bu. in September; 15.074 billion bu. in 2021

Beans: 4.313 billion bu.; trade expected 4.381 billion bu.
— compares to 4.378 billion bu. in September; 4.465 billion bu. in 2021

Cotton: 13.812 million bales; trade expected 13.34 million bales
— compares to 13.832 million bales in September; 17.52 million bales in 2021

USDA lowered its corn production estimate by 49 million bu. from last month, which was 10 million bu. less than traders expected. The yield was cut 0.6 bu. to 171.9 bu. per acre. USDA left harvested area at 80.844 million acres. Record yields are expected in Illinois, Wisconsin, California and Virginia.

In the top 12 production states, USDA cut its yield estimate in Kansas (down 7 bu. to 115 bu.), Michigan (down 2 bu. to 166 bu.), Nebraska (down 4 bu. to 172 bu.), South Dakota (down 8 bu. to 130 bu.) and Wisconsin (down 1 bu. to 182 bu.). The yield estimate was unchanged in Iowa (200 bu.), Minnesota (190 bu.) and North Dakota (141 bu.). USDA raised its corn yield in Illinois (up 6 bu. to 210 bu.), Indiana (up 1 bu. to 187 bu.), Missouri (up 2 bu. to 151 bu.) and Ohio (up 1 bu. to 187 bu.).

USDA cut its soybean crop estimate by 65 million bu. from last month, whereas traders expected a 3-million-bu. increase. USDA lowered the yield by 0.7 bu. per acre to 49.8 bu. per acre. It left harvested area at 86.631 million acres. Record yields are forecast in Arkansas, Mississippi and South Carolina.

In the top 13 production states, USDA cut its yield estimate in Indiana (down 1 bu. to 59 bu.), Iowa (down 1 bu. to 58 bu.), Kansas (down 4 bu. to 28 bu.), Michigan (down 1 bu. to 46 bu.), Missouri (down 2 bu. to 45 bu.), Nebraska (down 3 bu. to 49 bu.), Ohio (down 1 bu. to 55 bu.) and South Dakota (down 1 bu. to 40 bu.). The yield estimate was unchanged in Arkansas (53 bu.), Illinois (64 bu.) and Minnesota (50 bu.). USDA raised its yield estimate in North Dakota (up 1 bu. to 35 bu.) and Wisconsin (up 1 bu. to 54 bu.).

USDA trimmed its cotton crop estimate by 20,000 bales from last month, whereas traders expected a cut of 492,000 bales. USDA lowered its yield by 1 lb. to 842 lbs. per acre. It left harvest area unchanged at 7.876 million acres.

USDA raised its Texas yield estimate by 49 lbs. to 654 lbs. per acre. The Georgia yield was unchanged at 900 lbs. per acre.

U.S. carryover

Corn: 1.377 billion bu. for 2021-22; down from 1.525 billion bu. in September
— 1.172 billion bu. for 2022-23; down from 1.219 billion bu. in September

Beans: 274 million bu. for 2021-22; up from 240 million bu. in September
— 200 million bu. for 2022-23; unch from 200 million bu. in September

Wheat: 576 million bu. for 2022-23; down from 610 million bu. in September

Cotton: 3.75 million bales for 2021-22; unch from 3.75 million bales in September
— 2.8 million bales for 2022-23; up from 2.7 million bales in September

Old-crop corn carryover of 1.377 billion bu. was set by Sept. 1 stocks in the Grain Stocks Report. To account for the 148-million-bu. cut from September, USDA lowered total supplies 42 million bushels. On the demand-side, USDA put feed and residual use at 5.715 billion bu. (up 115 million bu.), food, seed and industrial (FSI) use at 6.769 billion bu. (down 6 million bu. from last month) and exports at 2.471 million bu. (down 4 million bu. from September). Total use of 14.956 billion bu. is up 106 million bu. from last month. USDA puts the national average on-farm cash corn price for 2021-22 at $6.00, up a nickel from last month.

New-crop corn carryover of 1.172 billion bu. is down 47 million bu. from last month but is 48 million bu. above the average pre-report trade estimate. Total supplies are down 172 million bu. from last month due to the smaller beginning stocks and a 49-million-bu. cut to the corn crop estimate. On the demand-side of the balance sheet, USDA cut total use 125 million bu. from last month to 14.15 billion bu. (which is down 806 million bu. from last year). USDA increased feed and residual use 50 million bu. from last month (to 5.275 billion), cut food, seed and industrial use 50 million bu. (to 6.725 billion bu. with all of that cut to corn-for-ethanol use, which is now put at 5.275 billion) and cut exports 125 million bu. (to 2.15 billion bushels). USDA puts the national average on-farm cash corn price for 2022-23 at $6.80, up a nickel from last month.

Old-crop bean carryover of 274 million bu. was set by the Quarterly Grain Stocks Report. To account for the 34-million-bu. increase from last month, USDA raised total old-crop supplies 31 million bu. (crop up 30 million bu. and imports up 1 million bu. from last month). On the demand side, USDA put crush at 2.204 billion bu. (down 1 million bu. from last month), exports at 2.158 billion bu. (up 13 million bu. from last month), seed use at 102 million bu. (unchanged) and residual use at 2 million bu. (down 14 million bu. from last month). USDA puts the national average on-farm cash bean price for 2021-22 at $13.30, unchanged from last month.

New-crop bean carryover of 200 million bu. is unchanged from last month and is 48 million bu. below the average pre-report trade estimate. The 34-million-bu. increase in beginning stocks was more than offset by a 65-million-bu. cut to the crop estimate to drop total 2022-23 supplies 31 million bu. from last month. On the demand side of the balance sheet, USDA projects crush at 2.235 billion bu. (up 10 million bu. from last month), exports at 2.045 billion bu. (down 40 million bu.), seed use at 102 million bu. (unchanged) and residual use at 20 million bu. (down 1 million). Total new-crop use is forecast at 4.402 billion bu., down 31 million bu. from last month and down 63 million bu. from last year. USDA puts the national average on-farm cash bean price for 2022-23 at $14.00, down 35 cents from last month.

USDA increased 2021-22 total wheat supplies 1 million bu. (due to rounding because the balance sheet shows no change to 2021-22 beginning stocks, production or imports). On the demand-side for 2021-22, USDA cut 8 million bu. from feed and residual use to raise 2021-22 carryover by 9 million bushels.

Wheat carryover for 2022-23 is projected at 576 million bu., down 34 million bu. from last month but 22 million bu. above the average pre-report trade estimate. Surprisingly, beginning stocks are up 9 million bu. from last month. Total supplies are down 114 million bu. with the crop down 133 million bu. based on the Sept. 30 Annual Small Grains Summary. Imports are also projected up 10 million bu. from last month to 120 million bushels. On the demand side, USDA made no changes to food or seed use and cut feed and residual use 30 million bu. to 50 million. Exports are also forecast at 775 million bu., down 50 million bu. from last month. Total use of 1.863 billion bu. is down 80 million bu. from last month and is down 54 million bu. from last year. USDA puts the national average on-farm cash wheat price for 2022-23 at $9.20, up 20 cents from last month.

USDA made not changes to the old-crop balance sheet for cotton and left estimated carryover at 3.75 million bales. The national average on-farm cash cotton price for 2022-23 is now put at 91.4 cents, down 0.6 cent from last month.

On new-crop, USDA cut total supplies 20,000 bales due to the smaller crop estimate. On the demand side, USDA projects total use at 14.8 million bales, down 100,000 bales from last month with exports accounting for the entire decline (now put at 12.5 million bales). USDA also cut unaccounted use 20,000 bales to -30,000 bales. USDA puts the national average on-farm cash cotton price at 90 cents for 2022-23, down 6 cents from last month.

Global carryover

Corn: 307.01 MMT for 2021-22; down from 312.14 MMT in September
— 301.19 MMT for 2022-23; down from 304.53 MMT in September

Beans: 92.38 MMT for 2021-22; up from 89.70 MMT in September
— 100.52 MMT for 2022-23; up from 98.92 MMT in September

Wheat: 276.01 MMT for 2021-22; up from 275.67 MMT in September
— 267.54 MMT for 2022-23; down from 268.57 MMT in September

Cotton: 85.26 million bales for 2021-22; up from 84.79 million bales in September
— 87.87 million bales for 2022-23; up from 84.75 million bales in September

Global production highlights

Argentina beans: 44.0 MMT for 2021-22; compares with 44.0 MMT in September
— projection of 51.0 MMT for 2022-23; compares with 51.0 MMT in September

Brazil beans: 127.0 MMT for 2021-22; compares with 126.0 MMT in September
— projection of 152.0 MMT for 2022-23; compares with 149.0 MMT in September

Argentina wheat: 22.5 MMT for 2021-22; compares with 22.5 MMT in September
— projection of 17.5 MMT for 2022-23; compares with 19.0 MMT in September

Australia wheat: 36.35 MMT for 2021-22; compares with 36.35 MMT in September
— projection of 33.0 MMT for 2022-23; compares with 33.0 MMT in September

China wheat: 136.95 MMT for 2021-22; compares with 136.95 MMT in September
— projection of 138.0 MMT for 2022-23; compares with 138.0 MMT in September

Canada wheat: 22.3 MMT for 2021-22; compares with 22.3 MMT in September
— projection of 35.0 MMT for 2022-23; compares with 35.0 MMT in September

EU wheat: 138.29 MMT for 2021-22; compares with 138.29 MMT in September
— projection of 134.75 MMT for 2022-23; compares with 132.1 MMT in September

Russia wheat: 75.16 MMT for 2021-22; compares with 75.16 MMT in September
— projection of 91.0 MMT for 2022-23; compares with 91.0 MMT in September

Ukraine wheat: 33.01 MMT for 2021-22; compares with 33.01 MMT in September
— projection of 20.5 MMT for 2022-23; compares with 20.5 MMT in September

China corn: 272.55 MMT for 2021-22; compares with 272.55 MMT in September
— projection of 274.0 MMT for 2022-23; compares with 274.0 MMT in September

Argentina corn: 51.5 MMT for 2021-22; compares with 53.0 MMT in September
— projection of 55.0 MMT for 2022-23; compares with 55.0 MMT in September

Brazil corn: 116.0 MMT for 2021-22; compares with 116.0 MMT in September
— projection of 126.0 MMT for 2022-23; compares with 126.0 MMT in September

Ukraine corn: 42.13 MMT for 2021-22; compares with 42.13 MMT in September
— projection of 31.5 MMT for 2022-23; compares with 31.5 MMT in September

South Africa corn: 16.3 MMT for 2021-22; compares with 16.3 MMT in September
— projection of 17.3 MMT for 2022-23; compares with 17.3 MMT in September

China cotton: 26.8 million bales for 2021-22; compares with 27.0 million bales in September
— projection of 28.0 million bales for 2022-23; compares with 28.0 MMT in September