Surprising traders, USDA reports smaller corn and soy harvests and shorter supplies

Today, USDA released three major reports, including the World Agricultural Supply and Demand Estimates (WASDE), Annual Crop Production, and Quarterly Grain Stocks reports. Combined, they tell a story of a smaller 2022 harvest and smaller domestic supplies of corn, soybeans, and wheat.

January 2023 WASDE Report 

2022/2023 U.S. Ending Stocks

The WASDE report pegged the U.S. 2022/2023 corn ending stocks at 1.242 billion bushels. This is below the trade’s estimate of 1.314 billion bushels and USDA's December estimate of 1.257 billion bushels.

For soybeans, the U.S. ending stocks were 210 million bushels, below the trade’s expectation of 236 million bushels and USDA’s December estimate of 220 million bushels.

USDA pegged the U.S. wheat ending stocks at 567 million bushels, below December’s estimate of 571 million bushels and the trade’s expectation of 580 million.

2022/2023 World Ending Stocks 

USDA pegged the world’s corn ending stocks at 296.4 million metric tons vs. the trade’s expectation of 297.9 million tons. Last month, USDA’s estimate was 298.4 million metric tons.

For soybeans, the world ending stocks are estimated at 103.5 million metric tons, above the trade’s expectation of 101.7 million tons. USDA's December estimate was 102.7 million metric tons.

For wheat, USDA pegged world ending stocks at 268.4 million metric tons. This is slightly above the trade’s expectation of 268 million tons. and above the December estimate of 267.3 million metric tons.

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2022/2023 Argentina and Brazil Crop Production 

For corn, Argentina’s production is pegged at 52 million metric tons, in line with the trade’s expectation of 52 million tons and below last month's estimate of 55 million tons. Brazil’s corn production is estimated at 125 million metric tons vs. the trade’s expectation of 126.3 million tons and last month’s estimate of 126 million. 

For 2021/2022, Brazil and Argentina combined are estimated to have produced 165.5 million metric tons of corn. As of now they are estimated to surpass that total in 2022/2023 by 11.5 million tons. 

For soybeans, Argentina is estimated to produce 45.5 million metric tons vs. the trade’s expectation of 46.7 million tons and December’s estimate of 49.5 million tons. Brazil’s soybean production is pegged at 153 vs. the trade’s expectation of 152.3 million metric tons and last month’s estimate of 152 million.

For 2021/2022, Brazil and Argentina combined are estimated to have produced 173.4 million metric tons of soybeans. As of now, they are estimated to surpass that in 2022/2023 by 25.1 million tons. 

2023 Annual Crop Production Report

The USDA Annual Crop Production Report pegged the 2022 U.S. corn production at 13.730 billion bushels. This is far below the December estimate of 13.930 billion bushels. The trade’s expectation was 13.933 billion bushels. 

The U.S. corn yield average was pegged at 173.3 bushels per acre. This is above the trade’s expectation of 172.5 bushels per acre. Last month, USDA pegged yield at 172.3 bushels per acre. However, harvested corn acres were reduced by 1.6 million from the December estimate.  

For soybeans, the USDA pegged production at 4.276 billion bushels. In December, USDA estimated production at 4.346 billion bushels. The trade’s expectation was 4.362 billion bushels.  

For yield, the soybean average is pegged at 49.5 bushels per acre vs. the trade’s expectation of 50.3 bushels per acre and last month’s estimate of 50.2 bushels per acre. Harvested soybean acres were also cut by 300,000.

In a separate report, USDA estimated 2023 winter wheat planted acres at 36.950 million acres. This is 11% higher than 2022 and above what traders expected, which was 34.485 million acres. 

Quarterly Grain Stocks Report 

The USDA Quarterly Grain Stocks report pegged U.S. corn stocks as of Dec. 1, 2022, at 10.809 billion bushels vs. the trade’s expectation of 11.153 billion bushels.

For soybeans, the USDA pegged the quarterly grain stocks at 3.022 billion bushels vs. the trade’s expectation of 3.312 billion bushels.

USDA says U.S. wheat quarterly grain stocks at 1.280 billion bushels vs. the trade’s expectation of 1.344 billion bushels.

Trade Reaction

"The two big surprises in the report were the reduction in corn harvested acres and the reduction in soybean yields," says Al Kluis, managing director of Kluis Commodity Advisors.

Kluis says the smaller ending stocks in the WASDE report were a reflection of the smaller harvest numbers in the Crop Production report. 

As far as prices are concerned following today's news, he says it is bullish for prices but "when you get a supply-scare market you tend to peak a lot faster than if you're in a demand-driven market. We'll be selling sooner than later." 

Naomi Blohm, senior market advisor with Total Farm Marketing, calls today "overall supportive" for corn and soybeans. 

"While there were tweaks to demand, the net result is that ending stocks for corn and beans are again smaller, which will likely keep prices elevated, and the competition for acres this spring fierce," she says. "The bottom line is that a record crop is needed from the United States this summer to alleviate the continued tight supplies. Even with slight reductions in demand, Mother Nature needs to cooperate."

Nick Tsiolis, founder of Farmer's Keeper, calls the cut to corn production a "big shock." 

"This report shook out a lot of first-time 2023 sales today," he says. "And these are great levels to start at. We're still waiting to see how the crop goes in here in the U.S. before directionally guessing this market. That will tell us if we have the 2023 bumper crop we're due for that will close the stocks gaps we got more clarity about today. Near decade high gaps for corn and soybeans might take the wind out of other crops in those marginal acres this year. That's a change from the past couple of years."