Stocks report feeds corn bulls

KANSAS CITY, Mo. — The “final” old crop ending stocks for the 2021-2022 marketing year were featured in the Sept. 30 quarterly grain stocks report from the U.S. Department of Agriculture.

The report, which includes quarterly ending stocks as of Sept. 1, also featured production revisions for corn and soybeans for the 2021 fall harvest and a few surprises along the way for the trade.

Arlan Suderman, StoneX Financial chief commodities economist, reviewed the new numbers in a webinar as combines rolled across the Corn Belt for the new crop year harvest.

What were some of the corn and soybean numbers that stood out?

The corn stocks number is at 1.377 billion bushels. That’s now the old crop ending stocks number and the beginning stocks for the 2022-2023 marketing year. That came in well below the trade at 1.512 billion bushels.

That was a product of larger use during the fourth quarter. We used 2.97 billion bushels during the quarter. USDA also revised last year’s crop size down by 41.4 million bushels.

Ironically USDA revised last year’s soybean crop upward by 30.2 million bushels. So, soybeans came in 30 million bushels above the average trade expectation and the trade was already expecting an increase in the size of stocks because of the poor finish to the export season. So, the report was bullish corn and bearish soybeans.

What did you see of note in the wheat numbers?

There was a bit bullish adjustment to wheat. We saw wheat stocks come right in at expectations of 1.776 billion bushels, exactly what the trade expected. However, the crop came in much smaller than expected.

USDA pegged the all wheat crop at 1.65 billion bushels, down from the previous estimate from USDA of 1.783 billion bushels. That’s 133 million bushels smaller crop than the trade was expecting.

That was a significant decline in hard red winter wheat, soft red winter wheat, spring wheat and durum wheat where there were big reductions in both acreage as well as yield to get that number. That tightens up the wheat balance sheet quite a bit.

The focus now shifts to what’s going through the combines, as well as the risk premium that was being put in the trade with annexation in Ukraine by Russia and the value of the dollar. Does this set the stage for further market volatility?

It really does. We came into this report with a Russia-Ukraine premium in it, worried about what the news headlines might be over the weekend as things escalate there. That kind of helps amplify the move in corn and wheat, but it also makes soybeans look attractive as a spread trade.

So, we’re seeing a lot of trade spreading corn and wheat against soybeans. Now with the crop getting off to a good start in Brazil, soybeans aren’t as big of a factor in Ukraine and Russia. They had the bearish report, so we’re seeing that inner market spreading dominate today.