February 05, 2023

USDA fine-tunes crop balance sheets

KANSAS CITY, Mo. — The U.S. Department of Agriculture’s supply and demand report July 12 featured new crop ending stocks that were slightly bearish for corn and neutral for the soybean and wheat complex.

Arlan Suderman, StoneX Group chief commodities economist, gave a rundown of the crop balance sheets and crop production reports.

The supply and demand report included the planted acreage and quarterly stocks data released a few weeks ago, so most of the numbers appeared as anticipated. Were there any parts of the report of note?

Suderman: It was mostly fine-tuning, so to speak, with mostly minor changes. The wheat crop came in a little bit larger than what the trade expected. That was mostly due to a larger winter wheat crop than what was expected, specifically soft red winter wheat, as well as white came in higher than expected. The spring wheat crop for the most part came in pretty much as expected, and there was a little larger durum.

As we look at the balance sheets for corn and soybeans, we saw some minor tweaks here and there, cutting soybean crush numbers on the new crop and the old crop, cutting corn feed usage, which was a reflection of the stocks number from the quarterly report.

A little bit surprising since those stocks came in almost exactly what the trade had expected was USDA still cutting old crop feed usage for corn by 25 million bushels.

So, relatively minor tweaks, making adjustments for the acreage where corn acreage went up slightly and soybean acres saw more of a significant drop.

USDA lowered 2022-2023 soybean ending stocks from 280 million bushels last month to 230 million this month.

Suderman: Soybean ending stocks came in about 19 million more bushels than what the trade expected with that acreage reduction, and that was largely because USDA cut crush estimates.

Other than that, no major changes in South America or in the U.S. domestic balance sheets.

Despite a relatively neutral report, the market started trading downward after the report.

Suderman: I start off nearly every presentation with a slide that says price is a function of supply and demand that is modified by the flow of money, and that is certainly been the case. We saw in the July 8 Commodity Future Trading Commission report that the index funds have become major liquidators of position, which is very unusual for this time of year for them to do so. That’s just that they’ve been under some duress, and they’ve had to liquidate some of their commodity positions. That has continued today.

We’re seeing it in crude oil, down 7% as we talk. That’s weighing on the ags, as well. The only real positive that we’re seeing in the ags right now is in the protein complex. Other than that, we’re pretty much seeing red on the screen.

We’re seeing increased demand for feed cattle with those cheaper feed prices today. A lot of these cattle producers are looking at the weather forecast for the Midwest for the pollination coming up in the next few weeks and raising concerns.

So, they see a chance to lock in some crush margins if they’re going to do so, buying their feed needs of corn on this down market and buying the feeder cattle. That gives a little bit of optimism for the back cattle market going forward.

Tom Doran

Tom Doran

Field Editor