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A Bearish WASDE: What the July Report Means for Markets, Producers

soybean field

USDA lowered its yield projection for corn in the World Agricultural Supply and Demand Estimates (WASDE) for July. The revision was both expected and significant. USDA left its projected soybean yield unchanged.

Ahead of the July WASDE, the market estimated corn yields would drop to an average of 175.8 bushels per acre, down 5.7 bushels from the June WASDE. The USDA was slightly more optimistic, revising its estimate to 177.5 bushels per acre.

Soybeans yields were pegged at 51.4 bushels per acre, down 0.6 bushels from June. The table below summarizes the pre-report expectations for both yields and production for corn and soybeans.

U.S. Corn and Soybean Production Estimates (Pre-July WASDE)

ItemAverageRangeUSDA June
Corn Yield175.8172 - 178-181.5
Corn Production15,14914,713 - 15,31815,265
Soybean Yield51.450.5 - 5252
Soybean Production4,2764,176 - 4,6214,510
Data Source: USDA

The market expectation for lower yields was justified. As of July 4, drought conditions were reported on 67% of corn and 60% of soybean acres. Nationally, the current corn crop is rated 55% good to excellent, the lowest level of quality crop for this point in the growing season since 2012.

Even so, the yield revision was a break from USDA’s historically conservative approach to July estimates. The WASDE released on Wednesday marks the first time since 2012 that USDA has reduced its projection for corn yields in July. Typically, USDA makes adjustments in August, when the WASDE is released alongside the year’s first NASS Crop Production estimates for corn and soybeans.

It also is worth noting that, historically, downward revisions in July have been followed by further adjustments in the August WASDE. (See chart below) In 2012, USDA reduced the projected corn yield by 20 bushels per acre, followed by an additional 22.6 bushels for a total downward revision of 42.6. The lower projection for 2023 corn yields heightens volatility in an already volatile market.

Corn: Month-to-month yield change from the June WASDE to August WASDE for 1993/94 to 2022/23

Corn Outlook: Higher Supplies and Ending Stocks

  • The U.S. corn crop is projected to produce 15.32 billion bushels this year, a record if realized and 11.6% higher than production for the 2022/23 marketing year. USDA’s lower yield estimate of 177.5 bushels is more than offset by its upward revision of planted corn acres in the June Acreage Report. USDA increased its estimate of corn acres by 2.1 million for a total of 94.1 million. This would be the third highest number of corn acres since 1944.
  • Demand on the balance sheet for 2023/24 was left unchanged from June.
  • Corn exports for marketing year 2022/23 continue to slump. USDA reduced 2022/23 corn exports by 75 million to 1.65 billion bushels. If realized, corn exports would be 31% lower than USDA initially projected in May 2022 and the lowest level since marketing year 2012/13.

What this means for corn producers

The July WASDE was bearish for corn, with USDA’s yield reduction on the high end of market expectations, which ranged from 172 to 178 bushels per acre. December 2023 corn closed down $0.18 to $4.83 per bushel.

US Corn Stocks-to-use and average farm price for 2009/10 to 2023/24F

Markets over-reacted to yield estimates ahead of the report. Moving forward, corn will be entrenched in a weather market.

Meanwhile, domestic ending stocks for 2023/24, at 2.26 billion bushels, are about 31% above their 10-year average. If demand remained constant, yields would need to drop to 171.5 bushels per acre to return to the 10-year average. Simply put, the U.S. is expected to have a lot of corn.

The stocks-to-use ratio of 15.6% is the highest seen since 2016/17, contributing to a projected season-average farm price of $4.80 per bushel. Increased demand will continue to be key to the balance sheet.

The global story for stocks is different. At 26%, the world stocks-to-use ratio is 1.8 percentage points below the 10-year average. International events such as the Black Sea Grain Initiative, which expires July 17, 2023, add uncertainty and will contribute to volatility in the U.S. corn market.

Soybean Outlook: Lower Expectations for Supply, Crush, Exports and Ending Stocks

  • While soybean yields are unchanged at 52 bushels per acre, USDA reduced its June estimate of planted soybean acres to 83.5 million. With this 4.5% drop in acres, the U.S. soybean crop is projected at 4.3 billion bushels. This is up 0.5% from 2022.
  • USDA adjusted the demand side of the 2023/24 soybean balance sheet. USDA lowered soybean crush by 10 million bushels to 2.3 billion, reflecting lower soybean meal domestic use. But at 2.3 billion bushels, soybean crush still would be a new high.
  • Soybean exports were reduced 125 million bushels to 1.85 billion on lower U.S. supplies and lower global imports. If realized, this would be the fourth consecutive marketing year that soybean exports have fallen.
  • With lower supplies only partly offset by reduced use, ending stocks for 2023/24 are projected at 300 million bushels, down 50 million from the June WASDE.

What this means for soybean producers

The July WASDE was bearish for soybeans. This was mainly the result of ending stocks coming in about 94 million bushels higher than market expectations. Based on lower supply and relatively high demand, USDA increased the U.S. season average price by $0.30 to $12.40 per bushel.

US Soybeans Stocks-to-use and average farm price for 2009/10 to 2023/24F

The 2023/24 stocks-to-use ratio at 7% remains tight compared to its 10-year average of 8.4%. By comparison, the global stocks-to-use ratio at 31.2% is well above its 10-year average of 27.4%.

Weather will be key going forward as any downward adjustment to soybean yields could make the balance sheet extremely tight. Holding demand constant from the July balance sheet, a yield reduction of just one bushel per acre would lower the stocks-to-use ratio to 5.1%; a two-bushel reduction would result in a 3.1% ratio.

If late-July and August are hot and dry, lower yields could cause demand to pull back, and crush and exports would likely fight for bushels.

Wheat Outlook: Higher Estimates of Supply, Domestic Use, Ending Stocks

  • Supplies rose on larger production due to higher harvested area and yields. USDA increased its all-wheat production estimate for 2023/24 to 1.739 billion bushels, the highest level since 2020/21 and up 4.4% from June. Winter wheat production is forecast at more than 1.2 billion bushels, up 6% from the June report and up 9% from 2022.
  • USDA pegs U.S. wheat yields at 46.1 bushels per acre, up 1.2 bushels from last month but down 0.4 bushels from last year’s average.
  • USDA increased total wheat use from last month by 20 million bushels to 1.857 billion. However, wheat usage remains at its the lowest level since marketing year 1976/77.
  • Hard red winter wheat stocks are the lowest in 16 years and exports are at their lowest since marketing year 1973/74.
  • U.S. wheat ending stocks continue to fall well below their 10-year average. While ending stocks were raised 30 million from last month’s report to 592 million bushels, 2023/24 ending stocks are approximately 33% below their 10-year average. Globally, USDA decreased ending stocks to 266.53 million metric tons from the 270.7 million metric tons in June.

What this means for wheat producers

On the domestic front, the report was bearish for wheat with higher-than-expected production and ending stocks, but lower global ending stocks provided some bullish sentiment. USDA pegged 2023/24 U.S. ending stocks at 592 million bushels, above the average trade expectation of 565 million bushels. While the 2023/24 stocks-to-use ratio at 31.9% is above the estimate from 2022/23 estimate of 30.7%, it remains well below the 10-year average of 43%. The projected 2023/24 season-average farm price is $7.50 per bushel, down $1.33 from last marketing year’s record high. The wheat balance sheet, domestically and internationally, remains tight.

US Wheat Stocks-to-use and average farm price for 2009/10 to 2023/24F


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