On May 12, 2022, the USDA released the World Agricultural Supply and Demand Estimates (WASDE) report for the new crop balance sheets. The trade was watching closely to see how aggressive USDA would be with new crop supply and demand estimates, given that old crop demand remains an area of concern. According to one analyst, the biggest surprise in the report came in wheat.
The report forecasted new crop corn stocks to reach 15.3 billion bushels, which is up 10% from last year. This is due to both larger production and an increase in feed usage. However, old crop corn exports were cut by 75 million bushels due to recent cancellations from China. The soybean balance sheet saw a 5% increase, with supplies, higher crush and ending stocks, but lower exports, to reach 4.51 billion bushels.
USDA is forecasting a record corn and soybean yield for the new crop, but as Joe Vaclavik of Standard Grain points out, this did not come as a surprise. The yield and acreage estimates were what the trade expected USDA to use. However, everything in all of the new crop balance sheets is contingent on weather, according to Vaclavik. USDA is assuming normal or favorable weather in regard to crop production.
Assumptions on supply hinge on good summer weather. But Bennett of AgMarket.net thinks USDA is also making big assumptions when it comes to demand. He believes the World Board made larger cuts than he expected. The trade expected USDA to use the 92 million acres of planted acres for corn, as well as the 181.5 bu. per acre for yield. But USDA had some pretty bold demand assumptions, which should come to pass if we continue on the trajectory that we've seen with cheaper corn prices. With that big demand increase, it kept the carryout into a 2.222, which could have been worse if they had used those big production numbers.
Drought is playing a role in the revisions to the wheat production estimate. Despite the big jump in planted acres, USDA pegged the crop at 1.659 billion bushels, only slightly higher than this year’s 1.65 billion bushels. The biggest surprise out of all the revisions in the report was the one to Hard Red Winter wheat. The crop estimate was like 75 million bushels below the average trade guess, and that was actually one of the bigger surprises in the report, according to Vaclavik.
The WASDE report gives a starting point for new crop balance sheets, but the predictions are all contingent on weather, making it impossible to predict the yields and balance sheets accurately. The report assumes normal or favorable weather conditions, and demand is a big assumption, as it is based on current corn prices. The biggest surprise in the report was the wheat production estimate, particularly for Hard Red Winter wheat.