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Turner's Take Ag Marketing | USDA 10 Year Baseline Observations

By: Craig Turner, Senior Risk Management Consultant

Turner's Take Ag Markets
 
Craig Turner
Office: 312-706-7610
Mobile: 331-243-0151
Twitter: @Turners_Take

GRAIN & OILSEEDS | US winter wheat conditions improved 2% to 30% GD/EX.  Ratings are still low but at least they are a step in the right direction.  Unfortunately for farmers in the western corn belt, rain is not likely in the near term forecasts.

The USDA released their 10 year baseline numbers yesterday.  Of note were the 2023 acre estimates.  The USDA estimates wheat acres increase by 2 million.  If true the US has the potential to increase ending stocks year-over-year for the first time in over five years.  Since 2016-17 acres have been declining to levels that even with trend line yields, ending stocks would decline year over year.  If all wheat is over 47 million next year as the USDA forecasts, ending stocks will build with trend line yields or higher.

The USDA also sees corn stocks rising to 1.7 billion next year on 92 million acres and a 181.5 yield.  This implies corn cold be $5 or lower this time next year.  The USDA has also increased average corn prices to $4.30 for years when we have abundant to burdensome stocks (stock/usage at 15% or higher).  This is a signal that the new lows for corn will be higher going forward.  

Click here for the latest USDA baseline projections.

Some of the estimates in this report you can disregard.  I don't see the point in having a corn crop estimates for 2030.  However, this report does give us a good insight into what the USDA is thinking about 2023 acres, average farm prices going forward, and trend line yields.

My big takeaway is the bull market for grain and oilseeds will eventually subside and we'll have lower pricing in the next year or two but I don't see the US going back to previous lows.  Soybean acres can stay steady as long as S. America has an average crop.  Soybean export stay relatively flat and demand from renewable biodiesel becomes the leading growth driver.  Corn acres will increase but it only takes one year to get back to adequate supply levels.  Wheat takes the longest to get back burdensome supply levels.  Corn takes a year.  Soybeans depends on more on S. America production, China, and renewable biodiesel demand.

 
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