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May 12th- Closing Market Commentary

05/12/2022
May 12th- Closing Market Commentary

HAPPY wheat markets to close:

July Corn + 3 cents/bu (7.91 1/2)

July Soybeans +7 cents/bu (16.13 3/4)

July Chi Wheat +65 3/4 cents/bu (11.78 3/4)

Cdn $ -0.00550 (76.465 cents)

WTI Crude Oil +0.42/barrel (106.13)

Wheat was the big “winner” of today’s report, as the USDA pegged world wheat stocks quite low. 2022/23 World wheat stocks (excluding China) were estimated at 14.9% which would be the 4th lowest ever!!! (Karen Braun, Twitter) This supply issue encourages rationing prices, and is reflected in higher futures prices like we saw today.

Notable USDA Report Highlights:

  • USDA left U.S. old crop corn ending stocks unchanged (below av. estimate) while cutting soybean carryouts (in line with expectations)
  • 2022/23 U.S. corn and wheat ending stocks are predicted to fall, but soybeans are expected to increase.
  • Total U.S. wheat production came out lower than the trade’s estimate (1.729 billion bushels vs. 1.791 billion) – High Abandonment rates on hard red winter wheat in Texas and Oklahoma. (Highest since 2002) Abandonment in Texas is expected to be more than 76% (4.2 of 5.5 million acres). If realized, this would be smallest U.S. hard red winter wheat harvest since 1963. 68% of winter wheat acres in the U.S. are currently experiencing drought conditions.
  • USDA estimated Ukraine wheat production at 21.5 million mt with 10 million mt of exports, and corn at 19.5 million mt with exports of 9 million mt. (This is down 35% for wheat production and 47% for exports, and 54% and 61% for corn)
  • The USDA CUT its corn yield estimate to 177 bu/acre (changes to yield have only occurred 5 times prior in the month of May) – Can probably be attributed to late planting.
  • Argentina soybeans were reduced , while corn and Brazilian corn and soybeans were unchanged.
  • World wheat stocks for 22/23 are well below trade expectations but corn and soybeans are well above.

Results of the “report of the hour”:

Another interesting side-note is that Conab (another analyst group) initially increased their estimate of Brazil’s corn crop (116.2 million mt from 115.6mmt) based on second crop production during their report before the USDA report. This afternoon, their report now shows a correction to this value, showing it decreased to 114.58 million mt.

The weather story for North Dakota/South Dakota/Minnesota continues to look bleak for corn acres. ND is no stranger to prevent plant acres, so it will be interesting to see whether there is a switch from corn à soybeans or corn à empty fields.

Earlier this morning, we saw an abysmal Export sales report for the week ending May 5th.

This morning we also saw a flash sale of 612,000mt of US corn to China (68,000 for 21/22 and 544,000 for 22/23). This positive news heading seemed to counteract the negative export sales as we led up to the USDA report. 

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