By Karl Setzer

The USDA lowered the national average corn yield to 175.4 bushels per acre (bpa) in the August WASDE report, a decline of 1.6 bpa from July. When combined with a decrease in harvested acres of 100,000, this lowered the U.S. corn crop 146 million bu (mbu) to 14.36 billion bu (bbu). Old crop ending stocks were bumped 20 mbu higher to a 1.53 bbu total, mainly from a decrease in ethanol use. New crop ending stocks were lowered 81 mbu to a total of 1.388 bbu. Lower new crop production was partially offset by decreases in feed and export demand. The new crop stocks to use is now at 9.6 percent, which is a rationing level.

On the soybean side, the USDA surprised trade by raising the yield by ½ bpa to 51.9 bpa average. This countered a decline in harvested acres of 300,000 to give us a crop of 4.53 bbu, a 26 mbu increase from July. The USDA trimmed 2021/22 soybean exports by 10 mbu to give us ending stocks of 225 mbu. This larger carryout combined with the larger new crop production to give is a 2022/23 carryout of 245 mbu, up 15 mbu from July. We did see an increase in new crop exports of 20 mbu to help with the larger inventory. Even with this increase in reserves, the stocks to use on soybeans remains a minimal 5.4 percent.

Changes to the U.S. wheat balance sheets were minimal. Ending stocks on the 2021/22 crop year were left unchanged at 660 mbu. The average U.S. yield was estimated at 47.5 bpa and harvested acres were lowered by 100,000. Ending stocks on wheat for 2022/23 were lowered by 29 mbu and now stand at 610 mbu, which is still an adequate volume.

Only minimal changes were made to global wheat and soybean ending stocks, even with a record wheat crop being forecast for Russia. The world wheat carryout for 2022/23 was steady at 267.3 million metric tons (mmt). The global soybean carryout was raised a minimal 1.8 mmt to a 101.4 mmt total, mainly from the larger U.S. crop forecast. World corn reserves are forecast to decline 6.2 mmt to a total of 306.7 mmt. This is mainly from the sizable losses to EU production. Only minimal changes were made to Ukraine export forecasts, which is what trade had been most interested in.

Beef and pork balance sheets were also updated with minimal changes. For 2022, beef production was nearly steady at 27.99 billion pounds, as was pork production at 27.08 billion pounds. For 2023, U.S. beef production was raised 320 million pounds to a total of 26.27 billion pounds. High imports of cattle from Canada were part of the reason for this bump, with imports of fed cattle up nearly 47 percent on the year. Pork production was unchanged for 2023 at 27.52 billion pounds.

Export forecasts on U.S. meats also favored beef over pork. U.S. beef exports for 2022 increased 65 million pounds to a total of 3.56 billion pounds. For 2023, the USDA raised beef exports 40 million pounds for a 3.02-billion-pound total. Pork exports for 2022 were lowered 2 million pounds to a total of 6.57 billion pounds. Pork exports for 2023 were unchanged at 6.515 billion pounds. The lack of Chinese business on pork is behind the lower export forecast.

More concern is being shown over the drought that has impacted the United States. At the present time, 29 percent of U.S. corn production and 26 percent of soybean production areas are suffering from drought. On a whole, 45 percent of the United States has been drier than normal in the past 30 days. Reports from across the country indicate rains have fallen just in time though which has prevented significant production losses at this point. Now that crops are maturing water demand will increase though and stress will become more evident.

Even with these just-in-time rains, some field scouts have adjusted their crop outlooks. One firm now claims that for corn, there is a 24 percent chance yields will be below trend, 22 percent chance they will be at trend, and a 44 percent chance of above trend yields. On soybeans, the opinion is there is a 9 percent chance of below trend yields, 54 percent chance of trend yields, and a 32 percent chance of above trend production. The greatest concern in these outlooks is on soybeans, where very little below trend production can be tolerated given current stocks to use projections.

When it comes to export demand, trade is placing heavy interest on soybeans. Current U.S. unshipped soybean commitments are record high at 578.4 mbu. There are mixed opinions on this rate of sales though, with some claiming this is a sign of active global demand that will cut into U.S. ending stocks. Others believe U.S. soybean sales are front-loaded and will drop off as buyers become covered. What will ultimately determine total demand will be the size of the South American soybean crop, which will be better known next spring.

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named. This is not independent research and is provided as a service. As such, this is considered a solicitation.