Play Turner’s Take Ag Marketing Podcast Episode 283

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The USDA’s August WASDE was bullish for corn and wheat while slightly bearish for soybeans.  In our podcast we go over why the markets will trade in range for the next month or two but could really take off later this year.  Also take our first look into the 2022-23 marketing  year for corn and soybeans to see what the ending stocks (and price) might look like a year from now. Make sure you check out this week’s Turner’s Take Podcast!

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August WASDE Analysis

They say it takes two days for a major USDA report to trade.  Day one the market trades the headlines.  Day two the market trades the guts of the 40 page report. I went through the WASDE again last night and today and these are my main takeaways

* The major US grain markets will remain tight for at least six month and possibly the entire 2021-22 marketing year

* The high price of wheat, corn and soybeans will make it difficult for any one major crop to “buy acres” from the other

* Corn and soybeans are likely to be choppy and trade in range until export demand picks up during harvest. This is the time of year weather premium comes out of the market as the USDA confirms the size of the crop. Deliveries against Sept futures along with harvest pressure have bearish influences in the market.  On the flip side the market knows we have tight stocks, end users will use breaks to add to coverage, and we expect a lot of demand interest during harvest.  For the next month or two we like being short straddles. 

* South America has to have a good crop.  The US and the world can not afford another short crop from a major exporting region.  It would not just be an issue of high prices.  Another bad crop means shortages of grain and oilseed.  The last time this happened in 2012 animals were culled due to lack of feed and lead to a two year livestock bull market.

* Meal could be the most plentiful feed substitute for corn and wheat shortages.  The high price of vegetable oil may mean crushing for oil and meal gaining feed share vs corn and wheat.  The IUS could be a much larger exporter of meal next year while keeping the soybean oil home for biodiesel processing.

* October through Dec could be big months for grain price rallies if demand is strong during harvest and an early La Nina impacts S. American growing weather.

I think we are going to have tight stocks and high prices for at least six month and possible for a full year.  That lead us to take a look at the 2022-23 marketing year.  We assumed 180mm acres of corn and soybeans combine, about the same as this year, with 88 to soy and 92 to corn.  With trendline yields and similar demand estimates year-over-year, corn and soybean stocks get back to adequate levels.  Odds are the US is at least a year away from $4 corn, $6 wheat, and $10 soybeans, and that is with a good S. American crop and trend line yields for 2022-23.

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