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May WASDE Projects Price Pressure

The May 2024 WASDE provided the first projections of supply and demand for the new marketing year. If projections pan out, producers are looking at strong production for the 2024/25 marketing year, increased supply and lower prices for corn and soybeans.

The May WASDE projected U.S. farmers will produce 14.86 billion bushels of corn and 4.45 billion bushels of soybeans. Table 1 is a snapshot of pre-report expectations for corn, soybeans and wheat, both old crop (2023/24) and new crop (2024/25).

Markets expected USDA to lower its estimates for 2023/24 production in Brazil and Argentina due to weather. USDA did in fact trim Argentinian corn production to 53 million metric tons, down from 55 in April. Markets were anticipating an even lower projection of 52 million metric tons.

Brazil’s corn crop is expected to produce 122 million metric tons, lower than both the April WASDE estimate of 124 million metric tons and the market’s pre-report estimates of 122.5 million metric tons. USDA put Brazil’s soybean production at 154 million metric tons, down from its April estimate of 155 but above market expectations of 152.6 million metric tons. Flooding continues in southern Brazil and related crop loss is fluid.

Table 1. Pre-Report Expectations vs. 2024 May WASDE Estimates and Projections for 2023/24 and 2024/25 corn, soybean, and wheat crops.

2023/24 Ending Stocks (May WASDE & Pre-Report)
  2023/24 Pre Report Ending Stocks Estimates (Million Bushels)
 2024 May WASDEAverageRange
Corn2,022 2,098 1,967 - 2,350
Soybeans340341 304 - 365
Wheat (All)688689598 - 710
 
2023/24 World Ending Stocks (May WASDE vs. Pre-Report)
  2023/24 Pre-Report World Ending Stock Estimates (Million Metric Tons)
 2024 May WASDEAverageRange
Corn313.08315.3 311 - 317.2
Soybeans111.78112.4 109 - 115
Wheat (All)257.8258.1 257 - 259.5
 
2023/24 Brazil Corn and Soy Production (May WASDE vs. Pre-Report)
  2023/24 Pre-Report Production Estimates (Million Metric Tons)
 2024 May WASDEAverageRange
Corn122122.5120 - 125.6
Soybeans154152.6147 - 155
 
2023/24 Argentina Corn and Soy Production (May WASDE vs. Pre-Report)
  2023/24 Pre-Report Production Estimates (Million Metric Tons)
 2024 May WASDEAverageRange
Corn535250 - 55
Soybeans5049.548 - 50
*Red = May WASDE above "Pre-Report Avg";
Green = May WASDE below "Pre-Report Avg"
Source: USDA and Dow Jones

 

2024/25 Production (May WASDE and Pre-Report)
  2024/25 Pre-Report Production Estimates (Million Bushels)
 2024 May WASDEAverageRange
Corn14,86014,897 14,720 - 15,342
Soybeans4,4504,430 4,165 - 4,496
Wheat (All)1,8581,889 1,775 - 1,952
 
2024/25 Ending Stocks (May WASDE and Pre-Report)
  2024/25 Pre Report Ending Stocks Estimates (Million Bushels)
 2024 May WASDEAverageRange
Corn2,102 2,256 2,032 - 2,513
Soybeans445432315 - 552
Wheat (All)766786652 - 862
 
2024/25 World Ending Stocks (May WASDE vs. Pre-Report)
  2024/25 Pre-Report World Ending Stock Estimates (Million Metric Tons)
 2024 May WASDEAverageRange
Corn312.27317.4312.0 - 321.2
Soybeans128.5120.0 109.5 - 130.2
Wheat (All)253.61256.9241.8 - 264.4
*Red = May WASDE above "Pre-Report Avg";
Green = May WASDE below "Pre-Report Avg"
Source: USDA and Dow Jones

 

Corn: 2024/25 Marketing Year

The U.S. corn outlook for 2024/25 is for larger supplies, greater domestic use and exports, and higher ending stocks.

USDA projected 90 million acres and 82.1 million harvested acres assuming an average rate of abandonment; this is in line with acreage projections from the March 28 prospective plantings report. As anticipated, USDA adopted trend yields of 181 bushels per acre, a record if realized. Total production is projected at 14.86 billion bushels – 482 million bushels below 2023/24 but still the fourth largest corn crop on record.

Demand will be key in marketing year 2024/25. However, when compared to USDA’s agricultural baseline released in February 2024, it lowered its usage projection due to sluggish growth from domestic and global meat production, a stronger U.S. dollar, economic uncertainties surrounding China, and a cooling U.S. economy. The May WASDE projected year-over-year usage to increase 0.68%, or 100 million bushels, down from the already modest February projection of 1.5%.

About half the increase could come from exports to offset a 5.4-million-ton reduction in exports for Argentina, Brazil, Russia and Ukraine. If realized, the U.S. would be the world’s largest corn exporter for the second consecutive year. However, the 2.2-billion-bushel export level would only be slightly above the 10-year average.

Corn used for ethanol remained unchanged from 2023/24 levels on expectation that gas consumption will be flat. Feed and residual use was 50 million bushels higher than a year ago due to larger supplies and lower expected prices.

Figure 1: Corn stock-to-use and average farm price

Ending stocks for the 2024/25 marketing year are projected at more than 2.1 billion bushels, the highest since 2018/19 but 154 million bushels below market expectations. Ending stocks would be 16.5% above the 10-year average. If realized, the stocks-to-use ratio would reach 14.2%, the highest since 2018/19.

Total projected supply of more than 16.9 billion bushels would be the highest since 2017/18, and prices are expected to drop. USDA put the average corn price for the 2024/25 marketing year at $4.40 per bushel, down $0.25 from 2023/24.

Figure 1 shows the U.S. corn stocks to use ratio with the average farm price for corn since marketing year 2009/10.

Soybeans: 2024/25 Marketing Year

USDA projects higher supplies, crush, exports and ending stocks for the 2024/25 soybean crop relative to a year ago. In line with the March 28 prospective plantings survey, USDA projects U.S. farmers will plant 86.5 million acres of soybeans and harvest 85.6 million acres with trend-line yields of 52 bushels per acre, 1.4 bushels per acre higher than in 2023/24. If realized, total supplies would reach of 4.805 billion bushels, second only to 2018/19, putting significant weight on soybean prices for the marketing year.

Figure 2: Soybeans stock-to-use and average farm priceUSDA projects total soybean usage at 4.36 billion bushels, an increase of 246 million bushels from 2023/24. Crush demand is projected to increase by 125 million bushels relative to a year ago to a record 2.425 billion bushels due to higher demand for soybean oil for biofuels use. U.S. soybean exports are also projected to increase to 1.825 billion bushels, an increase of 125 million bushels relative to 2023/24 due to lower soybean production from Brazil. Even with the increase, 2024/25 soybean exports would remain 7% below the 10-year average.

USDA’s projection for ending stocks of 445 million bushels was slightly above market expectations and, if realized, the highest level since 2019/20 and 20% above the 10-year average. This would put the stocks-to-use ratio at 10.2%, the highest since 2019/20 and only the seventh time since 2000 that it would exceed 10%.

The average price for U.S. marketing year 2024/25 is projected to be $11.20 per bushel, down $1.35 relative to a year ago. Figure 2 shows the U.S. soybean stocks to use ratio and the average farm price for soybeans since 2009/10.

Wheat: 2024/25 Marketing Year

The outlook for U.S. wheat calls for larger supplies, modestly higher domestic use, increased exports and higher stocks. The projected all-wheat yield is 48.9 bushels per acre, up 0.3 bushels from 2023/24. Fifty percent of the U.S. wheat crop was rated good-to-excellent as of May 6.

Higher domestic and global supplies are expected to weigh on wheat prices for 2024/25. All-wheat production is projected up 3% to 1.858 billion bushels, which would be the highest level since 2019/20. Meanwhile, supplies are projected up 5.7% on larger carry-in stocks and production.

USDA projects total domestic use to increase 1% relative to a year ago, mainly from higher feed and residual use. U.S. wheat exports are projected at 775 million bushels, an increase of 55 million bushels relative to a year ago due to higher supplies and more competitive U.S. prices. However, context is everything. U.S. wheat export levels relative to a year ago (2023/24) are estimated at a 52-year low.

With supply outpacing use, ending stocks are projected 11% higher than last year at 766 million bushels. If realized, this would be the highest level since 2020/21, but 13.8% below the 10-year average. All-wheat ending stocks also came in slightly below the average pre-report expectation by 20 million bushels.

Figure 3: Wheat stock-to-use and average farm priceWith expectations of supply outpacing use, wheat is projected to have a stocks-to-use ratio of 40.3%, the highest since 2019/20, and the second consecutive year of a higher reported ratio. This will put downward pressure on prices, with the projected season-average farm price at $6 per bushel, down $1.10 from last year. Figure 3 shows the U.S. all-wheat stocks to use ratio and the average farm price for wheat since 2009/10.

Globally, the wheat outlook for 2024/25 is for slightly lower supplies, increased consumption, modestly higher trade and reduced stocks. For 2023/24, global wheat ending stocks were slightly revised down to 257.8 million metric tons, staying within the range of trade expectations. For 2024/25, USDA projected world ending stocks at 253.6 million metric tons, approximately 3.3 million metric tons below the average pre-report expectation as lower carry-in stocks from China and Russia more than offset higher global production.

Corn and Soybean Sensitivity Analysis

Moving forward, the U.S. corn and soybean balance sheets will change. While the May WASDE is an important market report in the sense that it provides the first estimates for supply and demand for the new marketing year, subsequent WASDEs will change given market forces and dynamics. Between USDA’s June Acreage Report and the National Weather Service’s summer outlook calling for potentially above average temperatures and below average precipitation for much of the Midwest, corn and soybean markets will be dealing with uncertainty over planted acres and yield.

On top of that, the demand outlook for corn and soybeans remains uncertain due to the strength of the U.S. dollar, sluggish growth in U.S. and global meat production limiting feed demand, China, and the South American weather situation. All these variables could mean fluctuating U.S. corn and soybean demand in the coming months.

With that in mind, how will changing acreage and yields affect corn and soybean stocks?

The May WASDE reported stocks-to-use ratios of 14.2% for corn and 10.2% for soybeans, as highlighted in blue in the table below. Corn and soybean yields would need to be reduced for both crops to reach their 5-year average stocks-to-use ratios of 11% and 7.3%, respectively.

However, we could see high variability when more is known about planted acres; the next acreage report comes out in June. The table provides multiple sensitivity scenarios that adjust planted acreage aligned to pre-report expectations back in March, ahead of the 2024 prospective plantings report. As a reminder, the range of expectations ahead of the plantings report was 90 million acres to 93.8 million acres of corn and 84.3 million acres to 88 million acres for soybeans.

Table 2. Corn and Soybean Sensitivity Analysis Between Acreage and Yield Adjustments

  2024/25 Corn Yields
Planted AcresHarvested Acres181179177175173
Million AcresStocks-to-Use
9485.718.6%17.5%16.3%15.2%14.0%
9384.817.5%16.4%15.2%14.1%12.9%
9283.916.4%15.3%14.1%13.0%11.9%
918315.3%14.2%13.0%11.9%10.8%
9082.114.2%13.1%12.0%10.9%9.7%
*Beginning Stocks = 2.022 billion bushels
*Imports = 25 million bushels
*Total Usage = 14.805 billion bushels
*Abandonment Rate = 8.8%; consistent with 10-year avg.
Source: USDA

 

  2024/25 Soybean Yields
Planted AcresHarvested Acres5251.55150.550
Million AcresStocks-to-Use
8887.011.9%10.9%9.9%8.9%7.9%
87.586.511.4%10.4%9.4%8.4%7.4%
86.585.610.2%9.3%8.3%7.3%6.3%
85.584.69.0%8.0%7.1%6.1%5.1%
84.583.67.8%6.9%5.9%4.9%4.0%
*Beginning Stocks = 340 million bushels
*Imports = 15 million bushels
*Total Usage = 4.36 billion bushels
*Abandonment Rate = 1.1%; consistent with 10-year avg.
Source: USDA

 

Historically, there’s a tendency for corn prices to stay elevated when the stocks-to-use ratio falls under 10%. Using the U.S. corn balance sheet from the May WASDE and holding all else constant, yields would need to drop approximately eight bushels per acre for the stocks-to-use ratio to drop below 10%, reinforcing the need for additional corn demand in 2024/25.

It’s also significant that 90 million planted acres was at the low end of analysts’ expectations; a trendline yield of 181 bushels per acre guarantees a large crop. Any marginal increase in corn plantings in the June acreage report has the potential to further increase stocks even if yields were to decline. However, if U.S. producers continue to get rained out, this could alter the crop mix toward more soybeans.

We have a long way to go in the production year. Markets will be watching weather events and how they affect planting in the U.S. and harvest in South America. There is significant potential for increasing stocks for both corn and soybeans. However, the world stocks-to-use ratio for corn remains tight at 25.7% (10-year average: 28.2%). Risk management tools and pricing opportunities can help producers protect margins.

 

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