USDA did not adjust US acres or yield on corn or beans on this report. They usually do not, but with the drastic changes since the March prospective plantings, some had expected an adjustment.
Corn
Since neither acreage nor yield were adjusted for the US crop, the only thing USDA adjusted today was demand. They lowered export demand. They have been behind the curve estimating demand for the last two years now. The trade will be watching very closely for Chinese purchases of new crop corn as they are rebuilding hog herds. By decreasing exports, USDA’s first stab at 2021/2022 carryout came in around 150 million bushels higher than what the market expected. 1.5 billion carryout for the first estimate is very tight. USDA also did not change their estimates of the Brazilian corn crop despite zero rain. In my humble opinion, USDA further undermined their credibility.
The trade is expecting acres to be higher, demand to be higher and yield is still unknown. We will all be watching very closely to see which of those moves the most. Weather is crucial. 1.5 billion bushels is tight, but not $8 tight. If we get timely rains all summer, the highs will most likely be in before the June 30th final acreage report. If we lose part of the crop due to drought, we will most likely go to highs we have not seen before. Only time will tell.
Soybeans
Soybeans are going to be almost as tight next year as they are this year and USDA confirmed that today. Acreage is the wild card. At the current price levels, corn is favored to pick up acres. Soybeans have to try to get all the double crop acres they can. It is too wet in the Delta and if it remains that way there could be an acreage story building in beans. Soybeans could have both too much rain in the east and too little in the west.
Soybean oil is still record tight and moving higher. That makes it hard to ration demand since it will help keep crush margins positive and not slow down usage of soybeans. The soybean market is still trying to slow demand. Repeating from above: If we get timely rains all summer, the highs will most likely be in before the June 30th final acreage report. If we lose part of the crop due to drought (or cannot plant due to floods), we will most likely go to highs we have not seen before. Only time will tell.
Wheat
Hard red wheat did not get tighter compared to soft wheat (Chicago) stocks. US wheat is priced higher than most other places in the world right now. Winter wheat is much closer to harvest than the summer crops but there are still lots of unknowns on yield. Wheat is not tight enough to be a leader on the board but should closely track what corn does for now. The risk for wheat right now is political if Russia should change export taxes that could bring a lot of buying to US wheat. Wheat cannot get too cheap or it will have too much fed and also find itself too tight.
Cotton
Corn acres are too low and cotton acres are way too low. Using their outdated acreage number and trend yield, USDA projects cotton carryout at 3.1 million bales. Adjusting that number for reality brings carryout down closer to record tightness of 2.4 to 2.5 million bales. They did adjust exports down but also increased domestic usage.
