Bullish wheat, bullish corn

By Doug Tenney, Leist Mercantile

Corn is bullish because the yield was lowered 4 bushels for 2022. Wheat is bullish due to world ending stocks down almost 10 million tons.

Batter up! Today is opening day for the 2022-2023 marketing year even though the “season” is from Sept. 1, 2022 to Aug. 31, 2023. USDA today provides its first supply and demand tables (WASDE) for 2022 U.S. crops. It’s a long year when you consider that its first scrutiny begins nearly 4 months before the season ever begins. 

Traders will quickly be drawn to the USDA expected corn yield for 2022. USDA’s February Outlook Forum detailed the U.S. new crop corn yield at 181 bushels. Today the yield was 177 bushels. The May USDA new crop corn yield has used the February Outlook yield each year dating back to 2014. The reality of a reduced yield with this report is low in spite of the slow planting progress to date. 

U.S. old crop corn exports should be increasing in coming months. The Census Reports are currently at least 200 million bushels above those totals detailed with the weekly export reports. 

Following the noon report release, corn was up 9 cents, soybeans up 17 cents, and wheat up 33  cents. Prior to the report, corn was up 3 cents, soybeans up 7 cents, and wheat up 6 cents. 

U.S. corn ending stocks for 2021-2022 were 1.440 billion bushels, last month 1.440 billion bushels. U.S. soybean ending stocks were 235 million bushels, last month 260 million bushels. U.S. wheat ending stocks were 655 million bushels, last month 678 million bushels. 

U.S. corn ending stocks for 2022-2023 were 1.360 billion bushels, soybeans 310 million bushels, and wheat 619 million bushels. Trader estimates for 2021-2022, US corn ending stocks 1.412 billion bushels, soybean ending stocks 225 million bushels, and wheat ending stocks 686 million bushels. Trader estimates of ending stocks for the 2022-23 marketing year, corn 1.352 billion bushels, soybeans 317 million bushels, and wheat 659 million bushels. 

USDA today projected China would be importing 92 million tons of world soybeans, last month was 91 million tons. 

Brazil soybean production was 125 million tons, last month 125 million tons. Brazil corn production was 116 million tons, last month 116 million tons. Argentina soybean production was 42 million tons, last month 43.5 million tons. Argentina corn production was 53  million tons, last month 53 million tons.

Weather continues to be a dominant market feature. The U.S. Upper Plains is wet with more rain expected in the next week. The U.S. Southern Plains drought is worsening. Expect that prevent plant acres in North Dakota could be higher than normal as they battle excess moisture from April’s two blizzards. The corn prevent plant date is May 25 for northern counties, May 31 for the balance of the state. 

The U.S. Midwest is finally seeing several days of open weather with planting progress expected to rapidly push corn and soybean planting progress forward. However, note that rains in the eastern U.S. Corn Belt will challenge planting progress in the next two weeks. Europe is dry which likely reduces their wheat production. The much anticipated second crop corn production in Brazil has been suffering from dry conditions with production expectations declining. The reduced Brazil corn production should help push US corn exports higher in the next three months.

Traders will be scouring the WASDE report today to see if USDA lowers grain exports from Ukraine and Russia. Uncertainty abounds when the unshipped corn purchases by China from Ukraine will take place. In the past month there were reports of grain being shipped from Ukraine to Russia. Who knows when those rail cars will arrive with damage to infrastructure a major feature?

Expect price volatility for wheat to remain high. U.S. bakers have little coverage in place for third and fourth quarters of 2022. World wheat buyers are also lagging in covering their needs for the balance of this year. 

U.S. inflation continues to run at 40-year highs. The April Consumer Price Index had inflation up 8.3%, barely below that seen with the March number at 8.5%. Gasoline and diesel prices are at all-time highs. Expect inflation to be with us well into the end of 2022. 

Expect huge price volatility and wide trading ranges for the grains to continue into the July 4th  period.

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