What you should know ahead of the June WASDE

Grain Market Insider analyst says USDA may respond to planting delays by lowering the corn yield estimate in next week’s WASDE report.

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The June World Agricultural Supply and Demand Estimates (WASDE) report is due out next Wednesday. Going into the report, here is some context to know in the corn, soybean, and wheat markets and what I'll be looking for in the updated balance sheets.

Corn market expectations

When looking at the corn market, the month of May progressed with the concern that planting progress was behind and the market was adding risk premium to compensate. The last planting progress report for the month of May put overall corn planting ahead of the five-year average by one percentage point. The question some are asking is whether the USDA will adjust corn yield down from last month’s 181 bushels per acre (bpa) due to wet conditions even though planting is on pace, especially when areas like northwestern Iowa, southwestern Minnesota, and southern Indiana may still be behind.

Keep in mind that the truly late planting pace of 2019 is included in the five-year average, and in that year the USDA cut yield by 10 bpa. If they were to cut yield in this report, I certainly would not expect such an extreme number, but the question remains, will they? At this point, the trade may already be trading a number lower than 181 bpa. Also, keep in mind that if the USDA does make a cut to their current yield estimate, it could lower 2024/2025 carryout below 2 billion bushels.

Soybean market outlook

Since soybean planting started a little later, its planting pace was not as affected by the wet weather as corn. In fact, at the end of May, soybean plantings were ahead of the five-year average by five percentage points. I believe this would make it unlikely that the USDA would lower its soybean yield expectations now. Although as we move through the growing season, it could be found that the USDA’s 52 bpa projection is too high.

One thing that the trade remains concerned about is export demand. At this point in time, China has yet to purchase any new crop 2024/2025 U.S. soybeans, and old crop demand remains slow and behind last year’s pace. With current sales commitments for the 2023/2024 crop year 15% behind last year, and South America more competitive, there are thoughts that the USDA could reduce export demand by 20 to 30 million bushels, thereby increasing old crop carryout. Additionally, with the lack of demand for the 2024/2025 new crop from China, we could see an increase in 2024/2025 carryout as we move through time.

There remains a large disparity between the USDA estimates for Brazil and the estimates from Conab, Brazil’s agricultural agency. Last month, the USDA estimated Brazil’s soybean crop at 154 million metric tons (mmt) while Conab’s latest update came in at 147.7 mmt. A private analyst recently projected Brazil sustained 5 mmt in lost soybean supplies due to the recent flooding in southern Brazil and estimated their crop at 145 mmt. So, the question is, will the USDA lower its Brazil estimate, and if so, by how much?

Considerations for the wheat market

I am not hearing a lot of rumblings as of late regarding significant changes in the U.S. wheat balance sheet. In recent weeks, it has become more apparent that Russia has likely experienced some crop loss due to hot and dry conditions, and most recently frost, which has likely been the primary catalyst for the rally in wheat. The world wheat supply is becoming tight at an estimated 253.6 mmt for the 2024/2025 crop year, per last month’s WASDE.

A question that is circulating is whether the USDA will lower its forecast on Russia’s wheat crop. They currently sit at 88 mmt, whereas Russian agricultural market analysis firms IKAR and SovEcon reduced their estimates to 81.5 mmt and 82.1 mmt respectively.

Historical patterns and statistical perspective

From a statistical perspective, based on data drawn between 1993 and 2021, our internal research indicates that the June WASDE report day volatility can vary quite a bit among the commodities. For corn, the likelihood of a positive close is about even to that of a negative close following the report. The June report day percent net change ranks among the highest for both positive or negative moves when compared to the other WASDE reports, with negative closings losing an average 2.6% of value versus a 2.3% gain on average for a positive report day close.

Soybeans show a little heavier bias toward a negative report day close, indicating a 55% likelihood of a negative close versus 45% positive. Unlike corn, the percent change at settlement for soybeans following the June report ranks the lowest of the WASDE reports, with a 0.66% negative settlement on average versus an average 0.56% positive.

Looking at wheat, the June report shows a bias toward a negative settlement on the day of the report versus positive, with percent net change volatility ranking toward the upper end. On average, 59% of the June report days showed a negative settlement that was 1.9% lower on average, versus showing a positive close 41% of the time with an average gain of 2.1%.

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About the Author: Scott Masters is the editor of Grain Market Insider by Stewart-Peterson Inc., and Director of Market Analytics with Total Farm Marketing by Stewart-Peterson. Scott has over 30 years of grain marketing experience which includes trading grain options on the floor of the Chicago Board of Trade, and merchandising corn and soybeans at a local co-op in Eastern Iowa. Scott’s primary focus at Total Farm Marketing is helping grain farmers manage their operations’ market opportunities and risks.

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