June WASDE – Not Much Action After the Most Recent USDA Report

One of the most significant monthly events for the agricultural futures markets is the WASDE report. While the supply and demand data and USDA’s forecasts can move markets, the report is only a snapshot of the most recent conditions during the annual growing season. Mother Nature determines the weather, which can change in the blink of an eye. Droughts, floods, or other natural events can cause significant changes in crop progress and wild price swings in the futures exchanges. 

The markets greeted the latest June WASDE report with a yawn, but there is plenty of time for volatility over the coming months as the growing season continues. Moreover, the ongoing war in Ukraine is a significant event as Russia and Ukraine are Europe’s breadbasket, can the Black Sea ports are a critical logistical export hub. War has turned the fertile soil into battlefields and the ports into a warzone. The ongoing conflict pressures other growing regions to increase supplies to compensate for losses from the European agricultural hub. 

The top grain and oilseed futures markets have not changed much since the June WASDE, which was not all that bullish for prices. However, the USDA tends to take an optimistic approach to the report. The full text of the June WASDE is available through this link. 

Soybeans- Rising stocks have not supported prices

The USDA said, “U.S. soybean supply and use projections for 2023/24 include higher beginning and ending stocks.” The WASDE characterized the worldwide, “Global 2023/24 ending stocks are increased 0.8 million tons to 123.3 million with higher stocks for the United States, Brazil, and the E.U., which are partly offset by lower stocks for Argentina and Vietnam.” The USDA left the soybean price forecast unchanged from the May WASDE report. 

The chart highlights nearby July CBOT soybean futures settled at $13.6325 per bushel on June 8, before the June WASDE release. The price has moved higher as of June 14.

The new-crop November soybean futures chart displays the backwardation where prices for deferred delivery are lower than nearby delivery months. November beans went into the June WASDE report at $11.89 on June 8 and were over the $12.30 per bushel level on June 14. 

Rising stocks in the WASDE are not bullish for soybean prices, but they moved marginally higher after the June report. 

Corn- No change in the U.S.- Global stocks rise

The WASDE told the corn market that the “2023/2024 U.S. corn outlook is little changed from last months with increases to both beginning and ending stocks. Corn area and yield forecasts are unchanged.” The worldwide fundamentals showed, “Global corn ending stocks, at 314.0 million tons, are up 1.1 million from last month.” The USDA left its corn price forecast unchanged from the May report. 

July CBOT corn futures edged higher from $6.1025 on June 8 to the $6.13 level on June 14. 

The new-crop December corn futures are also lower than the July futures, in the same backwardated term structure as soybean futures. December futures moved from $5.33 on June 8 to the $5.4875 per bushel level on June 14. 

Corn prices remained steady after the WASDE report, and the backwardation is a sign of nearby supply tightness and expectations that the global crop will be enough to satisfy worldwide requirements. 

Wheat- Higher U.S. and global inventories

The USDA told the wheat market that 2023/2024 U.S. supplies and stocks would rise. Moreover, “Projected global ending stocks are raised 6.4 million tons to 270.7 million, largely on increases for India, Russia, and the E.U.” The USDA lowered its wheat price forecast by 30.0 cents per bushel from the May WASDE report.

The nearby July CBOT wheat futures moved from $6.2625 on June 8 to the $6.3050 level on June 14. 

 New-crop September CBOT wheat futures display a marginal contango, with prices for future months higher than the nearby delivery month. The September futures edged higher from $6.39 on June 8 to the $6.4175 per bushel level on June 14. 

It is all about the weather

The June WASDE was primarily bearish for prices, but soybean, corn, and wheat futures edged higher after the report. The market understands that the monthly information is just a snapshot, and the weather conditions across the critical northern hemisphere growing regions that will determine crop yields and prices. 

 In June, the hottest summer months are ahead, and drought conditions could devastate crops and change the USDA’s optimistic forecasts. The agency tends to make projections on a best-case weather scenario. In June 2023, the agency did not account for the potential of war-related supply issues, which remain a clear and present danger to corn and wheat’s fundamental equations. 

DBA is an ETF that tracks agricultural commodity prices

The most direct route for a risk position in soybeans, corn, and wheat is the CBOT futures and futures options. The Teucrium SOYB, CORN, and WEAT ETF products track a portfolio of three actively traded futures in the oilseed and grain futures markets. The Teucrium products are the only soybean, corn, and wheat-specific ETFs available. 

The Invesco DB Agriculture Fund (DBA) owns a portfolio of agricultural products, including exposure to grain and oilseed prices. At $21.34 per share, DBA had $915.7 million in assets under management. DBA trades an average of over 751,000 shares daily and charges a 0.91% management fee. 

As the chart highlights, DBA was at the $21.24 per share level on June 8, before the June WASDE report. On June 14, the ETF was slightly higher. 

The USDA and markets view the 2023 crop year with rose-colored glasses during the all-important northern hemisphere growing season. Any weather surprises or shortages from Europe’s breadbasket could cause sudden and violent price rallies in the agricultural commodities that feed, and increasingly power, the world. 

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