The full text of the USDA’s August 11 WASDE report is available through this link. There were no bullish surprises in the monthly report. Soybean, corn, and wheat futures markets will now wait until September for a better handle on crop yields and the 2023 harvest, which gets underway in the fall.
We have seen extreme grain and oilseed futures volatility since early 2022 when Russia invaded Ukraine. The war in Europe’s breadbasket will impact food and energy prices over the coming months and years. The USDA tends to look at a best-case scenario for agricultural crop production. However, in August 2023, uncertainties continue to plague the markets, which could cause sudden bouts of extreme price variance.
Sal Gilberte’s take on the August WASDE
I contacted Sal Gilberte, the founder of the Teucrium family of CORN, WEAT, and SOYB ETF products, for his opinion of the August WASDE report. Sal told me:
The August WASDE gives a first glimpse of survey-based yield estimates, and yields were reduced slightly for corn and soybeans, which is no surprise given poor early season weather conditions across a good portion of the U.S. grain belt. September’s WASDE is always much more informative, so it’s no surprise this month’s WASDE hasn’t moved markets much. There is plenty of grain in the world even with U.S. soybean supplies getting tighter and U.S. wheat inventories projected to be a full 27% below the five-year average. U.S. corn ending inventories above 2 billion bushels are more than adequate and could put downward pressure on corn prices over time. No real surprises came from this month’s report, other than the USDA’s optimism regarding corn and wheat exports from Ukraine, which should decline (but were left unchanged) given the collapse of the grain export deal. Traders and investors will continue to focus on access to grains from the Black Sea region, harvests and exports from South America, and the upcoming harvest season in the U.S. If Black Sea shipping lanes remain open grain markets around the world are set to be well supplied. China is having a poor weather year again, but with Brazil and Russia’s abundant harvests available for export it should have no problem securing its import needs. Markets remain quiet but vigilant with regard to the Black Sea war and further development of U.S. crops.
The situation surrounding the Black Sea Ports remains the most significant factor for the path of least resistance of agricultural commodity prices for the coming months. Soybeans have been steady since the most recent WASDE report, while corn and wheat futures have declined.
Consolidation in soybean futures
New crop November soybean futures settled at $13.1825 per bushel on August 10, the session before the August WASDE report.
The chart shows November soybean futures were virtually unchanged on August 15 after the USDA told the soybean market U.S. and global ending stocks declined from the previous report. The drop in inventories was enough to keep prices stable but did not lift new crop soybean futures after the August report.
Corn moves lower
New crop December corn futures were at $4.9625 per bushel on August 10.
The chart shows that after the WASDE report, the price dropped below the $4.80 level even though the USDA told the corn market U.S. and global ending stocks tightened and declined.
Downward pressure on wheat
Nearby September CBOT soft red winter wheat futures settled at $6.3775 per bushel on August 10.
The chart illustrates the decline to near the $6 per bushel level on August 15 even though the USDA told the wheat market U.S. and global supplies decreased and global inventories moved to the lowest level since 2015/2016.
Don’t count on low prices over the coming years
Sal Gilberte pointed out, “No real surprises came from this month’s report, other than the USDA’s optimism regarding corn and wheat exports from Ukraine, which should decline (but were left unchanged) given the collapse of the grain export deal.” The war in Europe’s breadbasket remains the most significant factor facing grain and oilseed markets. While Russia and Ukraine do not produce and export substantial soybean supplies, soybeans are an ingredient in biodiesel. Russia’s actions in the energy markets can impact the soybean supply and demand equation over the coming months and years.
The USDA viewed the snapshot of grain and oilseed fundamentals with rose-colored glasses, assuming enough supplies to meet the world’s requirements, and prices moved mainly lower. However, the geopolitical landscape remains turbulent, and the potential for sudden upside spikes remains a clear and present danger at the current price levels. I am a better buyer of corn, soybean, and wheat futures after the August WASDE report, leaving plenty of room to add on further declines.
