Wheat grabs USDA report headlines

KANSAS CITY, Mo. — “Shocking” wheat was taken into a different context in the U.S. Department of Agriculture crop production estimates on May 12.

USDA’s first survey-based winter wheat projections resulted in a 25% year-over-year production decline — a market shocker.

The crop production and supply and demand estimates reports featured bullish wheat number, supportive soybean estimates and neutral to slightly supportive corn figures.

Arlan Suderman StoneX chief commodities economist, provided his take on the data in a webinar.

What are your thoughts on USDA’s wheat numbers?

Suderman: The big story was wheat production. This comes from actual field survey with winter wheat production of just over 1 billion bushels. That’s about 355 million bushels below last year. That’s not far different than our StoneX number was and significantly below where the trade was.

Hard red winter wheat, at 515 million bushels, was 289 million bushels below where we were a year ago. We were at 585 million. The trade was at 629 million bushels.

Even the soft red winter wheat crop is smaller than the trade expected, smaller than I expected and smaller than last year.

This is as of May 1 when the surveyors are out. It’s now May 12 and the industry tours in the Central Plains is walking fields as we speak in 90-degree temperatures, wind blowing, adding more stress to the crop.

Will they come out with an even lower numbers later this week? That will be one of the keys I think the trade is going to be watching.

Kansas is where we see the big drop in actual production, down 132 million bushels from a year ago. Oklahoma is down 42 million bushels. Texas is down almost 38 million bushels from last year.

Overall, I think another question is abandonment. USDA’s abandonment number is pretty close to what we modeled, but how might high diesel prices affect that, because as diesel prices increase, they increase the cost of running the combine over those acres, raising the breakeven level at which you decide is it worth actually taking the combine into the field. So, we may push that abandonment up a little higher.

USDA estimated 2026-2027 soybean ending stocks at 310 million bushels. What were you expecting?

Suderman: The average trade guess was 364 million. We at StoneX barely missed it at 308 million bushels.

One thing that I noticed is USDA only increased exports by 100 million bushels for this next year while they took 10 million off the old crop. Why is that significant? Because China’s handshake agreement last October was to buy 12 million metric tons this year and 25 million metric tons next year.

But USDA is assuming that they won’t buy 25 million metric tons with that number. I think that’s something else of significance. Overall, tighter stocks for soybeans than expected.

What data stood out in the corn balance sheets?

Suderman: USDA had new crop corn ending stocks at 1.957 billion bushels, a little above where the trade was. I’m more significantly below at 1.833 billion.

So, I do think there’s some downside to this, but regardless once you slip below 1.5 billion that’s when the market starts caring. It wouldn’t take much of a yield drop in order to do that with this acreage.

I do think there’s a chance we could see a little bit more of an acreage shift from corn to soybeans, maybe another 1 million acres or so, helping to bring that down, then if we get any type of weather scare during the summer.

Now, going into a strong El Niño year, that reduces the risk of a weather scare. So, we need to be mindful of that. But we are starting to get on that cusp of where we could start to see the market get worried about weather with these stock levels.

I also think exports could be a little bit stronger, as well, unless we get another increase in the size of Brazil’s crop that reduces our exports more than we currently think.

The old crop corn balance sheet has ending stocks of 2.142 billion bushels for the current marketing year that ends Aug. 31.

The new crop ending stocks that dropped to 1.957 billion is a 12.1% stocks-to-use ratio. That’s significant because was we look at price patterns going forward, when we get that projected stocks-to-use ratio below 10%, we tend to rally prices after the July Fourth weekend.

But if it’s above 10%, we tend to see prices trend lower from mid-June into harvest. So, it’s critical where that number is and right now it’s at 12.1%.

What do you foresee in looking ahead toward upcoming USDA estimates in terms of changes?

Suderman: USDA told us the yield they were going to use for the supply and demand estimates in the FebruaryAg Outlook conference. They told us the acreage they were going to use in the March 31 planting intentions survey. We don’t expect these numbers to change until August.

It’s possible they will change if we have a significant weather event, but otherwise we don’t expect these numbers to change until the August report.