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Better-Than-Expected Yields: November WASDE

Figure 1 30-Day Percent of Normal Rainfall for South America November 2023The November WASDE released on Thursday aligns with anecdotal evidence from producers: Despite lackluster rains in many corn- and soybean-producing states, yields are coming in better than expected.

With corn and soybean harvest 81% and 91% complete for the week ending November 5, USDA yield estimates outpaced market expectations for both crops. USDA also increased its estimates for ending stocks. Below, I take a deeper dive into what the new estimates mean for markets and producers.

USDA did not change its projections for Brazilian production, despite excess rains in the south and lighter-than-average rainfall in its central areas. USDA projects that for marketing year 2023/24, Brazil is on pace to produce 163 million metric tons of soybeans, a record for Brazil if realized, and 129 million metric tons of corn, the second highest on record. Wet weather is expected to continue in the southern portion of Brazil. The next weeks and months will determine how this might impact yields.

Planting and Price Projections for 2024 Planning

This week, USDA also released 10-year projections for key U.S. field crops and livestock. USDA projects producers will plant 91 million acres of corn in 2024, down from 94.9 million that producers planted in 2023. USDA projects planted soybean acres to increase from 83.6 million this year to 87 million in 2024.

USDA expects corn prices to drop to $4.50 per bushel for marketing year 2024/25, down from $4.85 for this marketing year. Soybean prices are expected to fall to $11.30 per bushel from $12.90. (Figures 2 and 3 show U.S. corn and soybean price projections from USDA and two external providers used by Farm Credit Services of America and Frontier Farm Credit.)

Figures 2 and 3: Average and Projected U.S. Farm Prices for Corn and Soybeans (2010/11 through 2032/33P)

Figure 2 Average US Farm Price for CornFigure 3 Average US Farm Price for Soybeans

Margin compression is likely for 2024. With expected periods of oversupply in the market, especially for corn, producers will need to be intentional about protecting margins.

Corn Outlook: Larger Production, Higher Domestic Use, Exports, and Ending Stocks

  • USDA increased corn production 170 million bushels to 15.2 billion on higher yield expectations. The November WASDE pegged average corn yield at 174.9 bushels per acre compared to 173 in October.
  • With larger supplies, USDA revised all three major use categories. Feed and residual increased 50 million bushels to 5.7 billion; corn used for ethanol grew 25 million bushels to 5.3 billion; and exports rose 50 million to 2.1 billion bushels.
  • Supply jumped more than use. As a result, corn ending stocks increased to 2.15 billion bushels, up 45 million bushels from October.

What this means for corn producers

The November report was bearish for corn, with December corn futures down on release of the report. Leading the bearish tone was the better-than-expected yield estimate. Markets were expecting 173.2 bushels per acre, 1.7 bushels lower than the USDA estimate. If USDA yield estimates are realized, the U.S. corn crop would be a record, surpassing marketing year 2016/17.

While USDA increased total usage by 125 million bushels, it wasn’t enough to offset supply increases. As a result, ending stocks were 25% above the 10-year average.

The stocks-to-use ratio rose to 14.9%. If realized, this would be 2.8 percentage points above the 10-year average and the highest since marketing year 2018/19. The projected season-average farm price was lowered $0.10 per bushel from October’s estimate down to $4.85 per bushel.

USDA increased foreign corn production by 6.3 million metric tons to 1.2 billion and world ending stocks to 315 million metric tons. If realized, this would be the highest level of world ending stocks since marketing year 2018/19. However, the global stocks-to-use ratio remains tight at 26.1 percent, 2.7 percentage points below the 10-year average.

Soybean Outlook: Increased Production and Ending Stocks

  • USDA increased 2023/24 soybean production by 25 million bushels to 4.13 billion. This was due to national average yields revised higher by 0.3 bushels to 49.9 bushels per acre.
  • Total usage on the domestic balance sheet remained largely unchanged from October’s estimate. A record soybean crush of 2.3 billion bushels is still expected, while 2023/24 exports of U.S. soybeans are projected to be 10% below the 10-year average.
  • Ending stocks were raised 25 million bushels to 245 million bushels.

What this means for soybean producers

USDA’s revisions to the soybean balance sheet were bearish, with November soybeans down in the market. Both USDA yield and ending stock projections were higher than market expectations: 49.9 bushels per acre vs. 49.5 and 245 million bushels vs. 225. The largest production increases came from Wisconsin, Tennessee, North Dakota, South Dakota and Ohio.

Despite upward revisions, the U.S. soybean balance sheet remains tight. For the fourth consecutive marketing year, U.S. soybean ending stocks are projected below their 10-year average. The 2023/24 stocks-to-use ratio of 5.9% is 2.5 percentage points below the 10-year average. USDA left the average farm price at $12.90 per bushel, a reflection of the tight balance sheet for soybeans.

The global supply and demand picture for soybeans included lower beginning stocks, higher production, higher crush and lower ending stocks. USDA raised global soybean production by 0.9 million metric tons to 400.4 million due to higher production from Russia, Ukraine, and the United States.

Global ending stocks came in lower than market expectations -- down 1.1 million tons to 114.5 million metric tons. Higher stocks from the United States and Brazil’s 2022/23 crop were more than offset by lower stocks from China.

Due to lower global ending stocks, the global stocks-to-use ratio declined slightly from October’s estimate of 30% to 29.6%. However, the global soybean situation continues to remain abundant.

Wheat Outlook: Larger Supplies, Decreased Domestic Use, Unchanged Exports, and Higher Ending Stocks

  • USDA increased 2023/24 ending stocks by 14 million bushels to 684 million, with imports up 10 million bushels and domestic use down 4 million bushels.
  • The global wheat outlook calls for increased supplies, slightly lower consumption, less trade and larger ending stocks.
  • Global supplies were revised higher by 0.6 million metric tons to more than 1.05 billion. Global production was lowered, but beginning stocks increased.
  • Projected global ending stocks rose 0.6 million metric tons to 258.7 million, with larger forecasts for Russia, China and Argentina more than offsetting declines from India, Ukraine and Brazil.

What this means for wheat producers?

Like corn and soybeans, the wheat report was bearish. USDA revised both U.S. ending stocks and world ending stocks for 2023/24 higher than the market was anticipating. The result: the average farm price for 2023/24 was lowered by $0.10 down to $7.20 per bushel.

The stocks-to-use ratio for 2023/24 U.S. wheat increased from 36% in October to 36.9% in November. However, the domestic balance sheet remains tight, and the 2023/24 stocks-to-use ratio is 6.1 percentage points below the 10-year average.

Global wheat production was lowered 1.5 million metric tons to 782 million due to downward revisions from India, Argentina, Kazakhstan, the United Kingdom, Brazil and Argentina. However, production decreases from these countries were partially offset by a 5-million-ton increase from Russia.

The November WASDE puts world ending stocks at their lowest level since 2015/16. The global stocks-to-use ratio for 2023/24 increased slightly from 32.5% to 32.6%, but is 2.8 percentage points below the 10-year average. The global wheat market remains tight.


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