Thomas Call
MIDCO-Commodities
September WASDE report: enough food for the bulls?
This month’s WASDE report was one of the most anticipated in quite a while. Headed into the report, we saw a lot of bullish enthusiasm. And rightfully so. The corn and soybean markets rallied sharply in August, a time when crop values typically fall ahead of harvest, on the perceived worse than expected production. Much of the bullishness had been priced in and now it was time to see the lack of production on paper with the September WASDE. So was it enough for the bulls?
CORN
The market was expecting the US corn yield to be cut from 180.7 to somewhere around 178-179. USDA did indeed cut the yield down to 178.5, which does confirm the lack of production everyone had been talking about and seeing. But USDA also cut the demand side of the equation with the Feed and Residual component falling to 5.95 bil bu from 6.1 bil bu. The net result was ending stocks, one of the most closely watched metrics in the market for a sense of the supply/demand balance, fell to 1.567 bil bu. This ending stocks figure was somewhat of a disappointment for the bulls. This figure is largely priced into the market and likely does not provide the kind of supply crunch that warrants the next leg higher for corn prices, at least in the near term.
This does not mean corn prices are on a one-way trip lower. But for prices to move higher we are going to need to see another catalyst in the coming weeks. That catalyst could be disappointing yields once harvest begins, or worse global conflict. But for now, the September WASDE report did not contain much, if any, outright bullish data, and it no doubt halted the upside price momentum.
BOTTOM LINE: The market confirmed the recent rally with the data. But for those looking for more upside in corn, this report was disappointing.
SOYBEANS
The soybean yield was basically unchanged at 52.8 bu/acre in September versus 52.7 bu/acre in August. This was a touch higher than expected. Export sales for beans were revised higher but overall, the market would have needed a lower yield figure than the one we saw to move higher. The disappointment showed in the price reaction – soybeans were down nearly 40 cents on the day.
Not all is lost for soybeans. The demand side of the equation is strong and if we see any issues with the upcoming Brazil season it will be supportive for the bean market. But much like corn, it felt like the bullish momentum for beans was halted today.
BOTTOM LINE: The market confirmed the recent rally with the data. But for those looking for more upside in beans, this report was disappointing.
WHEAT
The US balance sheet for wheat was unchanged. The big changes in the report came from the global balance sheet. World ending stocks rose to 276.29 mmt from 273.25 mmt – a bearish note for the market. The rise in ending stocks came from increases in production around the globe. USDA pegged Canada production at 36 mmt, up from 35 mmt in August. Canada’s exports also rose to 30 mmt from 28.5 mmt.
BOTTOM LINE: The market did not like to see the global ending stocks figure rise. A lot of risk remains in the market with the Ukraine/Russia conflict, but the supply in September grew – a bearish point the market focused on.