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December WASDE Report Hardly Mundane
Wednesday, January 1, 2025
filed under: Marketing/Risk Management
By Mike Krueger*
The last act of 2024 was the USDA’s December WASDE (supply and demand) estimates that were released on December 10.
The December WASDE is typically pretty mundane. We’re in-between growing seasons, and many people worldwide have turned their attention to a holiday season.
None of that seemed true this December — including the USDA’s WASDE.
Here are some things to consider:
December’s USDA WASDE —
• Did not make any changes to the November soybean outlook. U.S. ending stocks are still projected to rise from 342 million bushels last year to 470 million bushels this marketing year. Some analysts believe that number will get bigger if the new Trump administration puts tariffs on China’s imports into the U.S.
• USDA left its estimate of Brazil’s soybean production at 169 million metric tons (MMT). That would be a new record. Some analysts are carrying even bigger numbers.
• The USDA reduced soybean oil ending stocks slightly while at the same time increasing the oil yield. Vegetable oil demand remains the major story in the oilseeds complex. The chart on the next page shows the rapid rise in soybean oil consumption in the U.S.
• Wheat numbers in the WASDE were little-changed from last month.
• USDA recognized the aggressive pace of U.S. corn export sales and raised the export forecast. The corn export sales pace is the highest it’s been in more than 30 years. USDA also increased the ethanol production forecast.
The result was that corn ending stocks were reduced and are now projected to be slightly smaller than last year. Once upon a time, some analysts thought U.S. corn ending stocks could nearly double from the 2023/24 marketing year. These numbers should add support to the corn market.
• There were no adjustments to the US sunflower production.
Election and other “things” –
• President-elect Trump has stated he will impose tougher tariffs on goods from China (10%), Mexico (25%) and Canada (25%). China is by far our biggest soybean buyer. Mexico is our biggest corn and wheat buyer. Canada exports more than 100 million bushels of spring wheat and durum to the US.
• There will be a new regime in Syria. The trouble is that no one knows what that might look like.
• The Russia/Ukraine war continues.
• Weather has improved in South America and across the U.S. Southern Plains hard red winter wheat region. Late-season rains have improved U.S. winter wheat prospects.
The soybean market continues to have the most bearish fundamental situation. Ending supplies in Brazil have been building for several years because of increasing acres and generally very good production.
The U.S., on the other hand, has been in the opposite situation, as ending supplies have been tight. This situation is projected to change significantly through the balance of this marketing year ending on May 31, 2025. U.S. ending supplies will approach 500 million bushels. That is nearly double from just a year ago.
The situation would be significantly worse if the U.S. wasn’t crushing a record amount of soybeans for several consecutive years. This crushing pace will continue to grow as more soybean processing plants are built and existing plants are expanded.
There is a long-term policy change in the European Union (EU) that could eventually turn the EU into a major importer of vegetable oil and meal. The EU “Farm to Fork” policy will result in significant production declines starting in 2030. In addition, they will not import agricultural products produced from land that resulted in deforestation. That basically takes out Brazil and Indonesia.
The corn outlook has been steadily improving. The current super-strong export pace is partly the result of the threat of sanctions against Mexico; but there are also some shortfalls in competing corn markets like Ukraine. World corn supplies are tight among the major corn exporting countries. This tightness is finally starting to manifest itself in strong U.S. corn export sales.
Wheat markets actually have the best fundamentals of all, but can’t find a rally. This should still change in the months ahead. Russia has been increasing its export tax, as domestic prices are far above export prices. Russia’s winter wheat crop went dormant in poor shape because of a very dry fall season. Ending supplies among the world’s other major exporters are tight except in the U.S. This should give wheat a “hard spot” in the next several months.
Rarely has there been a time in modern history that has seen more geo-political uncertainty than now. It has been amazing how little impact this uncertainty has caused in the markets over the last two years — but that can change quickly.
* Mike Krueger founded The Money Farm, and is now a senior analyst with World Perspectives, a Washington, D.C.-based consulting company. While the information in this article is believed to be reliable, marketing involves risk, and the author and The Sunflower assume no responsibility for its use.