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TURF WAR:
WASDE Doozy

The USDA makes HUUUUUUUUUGGGGE changes to its US crop estimates.

Turf War: WASDE Doozy

  • The USDA made huge changes to US crop forecasts in their August WASDE.
  • Coarse grain estimates were the epicentre.
  • US growers’ Trade War response is even bigger than initial estimates.
  • The USDA added 2 million acres to US corn planting, mainly at the expense of soybeans.
  • And, the USDA’s yield estimate is 188.8 bu/a, well above the consensus.
  • Proving, again, that rain makes grain.
  • The revisions add around 2% to global coarse grain supply, confirming easing supply.
  • More coarse grain means less oilseeds: US soybean planting is much lower.
  • The oilseed SnD impact is modest because US soybean yields are high and US market share is lower.
  • The soybean price impact was less modest because it soothed market worries about US exports.
  • The impact is high for US soybeans but modest for global oilseeds.
  • Wheat, by contrast, saw minor changes – call it unchanged.
  • So, wheat remains stuck in the gray area between neutral and tight.
  • Ahead is a potentially influential official update on Brazil’s corn crop.
  • And dry conditions across some of Europe, Ukraine and Russia remain a ‘live’ issue for grains and oilseeds.

Wheat

Wheat, overall, is little changed. The global inventory ratio is a shade tighter. But, applying the fuzzy substance uber faux precision rule, that is unchanged.

The only useful detail is that USDA bumped up its US winter wheat inventories a little. So, US wheat inventories remain elevated and, as such, a relief valve for any wheat supply interruptions.

Coarse Grain

The USDA’s coarse grain numbers saw huge changes. And those changes make the shift to neutral supply conditions unambiguous.

The USDA’s estimate changes and non-changes:

  • US corn yield estimate raised 181 to 188.8 bu/a; the market’s average guess was about 184.
  • US corn planting was increased by 2 million acres.
  • Brazil’s 2024 corn crop unchanged at 131mmt.
  • EU corn production was reduced a little by poor weather.
  • Russia and Ukraine’s corn production was unchanged.

The USDA’s new US estimates added more than 26mmt (about 2%) to world coarse grain supply. Beyond the USDA’s estimates, the market is watching several issues. The market has at least 4-5mmt extra production from Brazil in mind, adding to supply. Offsetting that is potentially lower production in the EU, Ukraine and Russia. The losses across those three will have to be very large (about 30%) for a complete offset. Possible, yes, but also unlikely.

In summary, the USDA’s August numbers more than validated expectations of easing in coarse grain supply. The extent of that easing is still a live issue. The market is awaiting updated official estimates for Brazil’s corn crop. And is also watching the weather across Europe, Ukraine and Russia.

Oilseeds

The USDA’s higher US corn planting was mirrored in lower US soybean planting. The global impact, though, is more modest. US soybeans are less important to the global balance sheet anyway. And less US soybean acres are offset by hefty US yields.

There was one other notable change for oilseeds. The USDA did cut their estimate for sunflowerseed production in Europe. That cut might not be the last either because the issue is still evolving.

Nonetheless, the global SnD is still likely on the low side of neutral. The soybean price reaction seems at odds with that depiction. The reconciliation is that the USDA’s changes have a far greater impact on US soybean balances. The market was fretting about where US soybean exports could go other than China. The USDA’s changes shrink that ‘problem’.

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