Rose on Grain – USDA Releases Bullish New Crop Balance Sheets

May 16, 2022 2:04 am
Published by

Louis W. Rose IV

Corn:

CME July corn futures gave back 3½ cents last week to finish at 781¼.  We did not recommend trading any bias last week for corn, wheat, or beans due to the late-week release of the May WASDE Report. 

The corn market finished near unchanged last week as strengthening US currency and weak US export sales were offset by the war in Ukraine, supportive data from Conab in Brazil, and bullish new crop balance sheets released by USDA in the May WASDE report.

In its May WASDE report, the USDA projected 2022/23 domestic ending stocks approximately 6% lower Vs 2021/22 at 1.36B bu.  Aggregate world carryout for 2022/23 was projected slightly lower Vs 2021/22 at 12B bu.

Domestically, sowing across the US has been slow this season, but we hear that significant progress has been made over the last week.  We also continue to hear of planned reductions in southern acreage in favor of soybeans and cotton – mostly soybeans.

Net export sales and shipments were lower Vs the previous sales period at approximately 8M and 59M bu, respectively.  Sales were off the pace required to meet the USDA’s projection while shipments exceeded the pace requirement.  The US is 92% committed and 65% shipped Vs the USDA’s target.  Sales are well ahead the average expected pace for this point of the season; shipments are near on par with their expected pace.

Internationally, Conab’s latest estimates continue to show shar p declines in production estimates from earlier in the season, as drought has damaged production potential.

CFTC Commitments of Traders data for the week May 10 (futures only) showed that the trade modestly reduced its net short position Vs the previous assay period to approximately 3.5B bu; large specs trimmed their net long to around 1.57B bu.  

For an in-depth analysis of CFTC data see our weekly COT analysis and commentary.

For this week, the weekly technical analysis for and money flow into the July contract remain bullish.  Weekly USDA export data, weather and crop reports, and geopolitical events are major factors for this week for corn, wheat, and beans.

Soybeans:

CME July soybeans gained 24½ cents last week to finish at 1646½.

CME soybeans finished higher, despite strengthening US currency, on supportive data from Conab (Brazil) and bullish new crop balance sheets from SDA.  We expect domestic supply to remain tight this season, but it could loosen a bit if, as we (and many others) expect, US acreage proves to be higher Vs the USDA’s Mar 31 Planting Intentions Report.

In its May WASDE report, the USDA projected 2022/23 domestic ending stocks 32% higher Vs 2021/22 at a still-very-bullish 310M bu.  Aggregate world carryout for 2022/23 was projected 17% higher Vs 2021/22 at 3.66B bu.

Domestically, as with corn, sowing across the US has been slow this season, but we hear that significant progress has been made over the last week.  We continue to believe southern acreage will be significantly to notably higher Vs 2021.  Rice acreage will also be up significantly.

Net export sales and shipments were lower Vs the previous assay period at approximately 5M and 17M bu, respectively.  Sales were ahead of the pace required to meet the USDA’s projection while shipments were off the pace requirement.  The US is 100% committed and 82% shipped Vs the USDA’s revised target.  Sales are notably ahead the average expected pace for this point of the season; shipments are off slightly regarding expected pace.

Internationally, Conab has estimated that 95% of the Brazilian crop has been harvested.  Conab raised its production estimate 1.1% Vs April, but it is still off more than 10% Vs 2021 as droughty conditions have plagued the crop.

CFTC Commitments of Traders data for the week ending May 10 (futures only) showed that the trade reduced its aggregate net short position Vs the previous assay period to approximately 1.33B bu while large specs reduced their net long to around 633M bu.

For this week, the weekly technical analysis for and money flow into the July contract remain bullish.

CME Wheat:

CME SRW July futures gained 69 cents last week at 1177½.

CME wheat finished notably higher, despite continued strengthening of US currency, exceptionally poor condition of the US crop, the war in Ukraine, and (mostly) on very bullish initial 2022/23 balance sheets from USDA.

In its May WASDE report, the USDA projected 2022/23 domestic ending stocks 5% lower Vs 2021/22 at 619M bu.  Aggregate world carryout for 2022/23 was also projected 5% lower Vs 2021/22 at 9.8B bu.

Domestically, the US wheat crop continues to be rated in abysmal condition.  Harvest season across the US for winter wheat is just around the corner, but there may be little evidence of significant harvest pressure this year; in fact, new crop contracts will likely be bidding for acres against cotton and corn, among other crops.

Net export sales and shipments were lower Vs the previous assay period at approximately 500K and 9M bu, respectively.  Both sales and shipments were off the average weekly pace required to meet the USDA’s official target.  The US is 89% committed and 80% shipped Vs the USDA’s revised target.  Sales are on par the average long-term pace for this point of the season while shipments are significantly off their expected pace.  SRW sales were near non-existent.

Internationally, the war in Ukraine continues to remind all market participants of just how integral the Black Sea region is to world wheat production and exports.  However, wheat is a ubiquitous crop across the globe and acreage adjustments have likely already been made in many major producing regions.  Technically, much of the war, without significant intensification, may be priced into the market.

CFTC Commitments of Traders data for the week ending May 10 (futures only) showed that the trade reduced its aggregate net short position to approximately 433M bu while large specs increased their aggregate net long to almost 80M bu.

For this week, the weekly technical analysis for and money flow into the July contract remain bullish.  

Have a great week!

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    This post was written by Louis Rose