As harvest comes to a close, the Agriculture Department increased production and offset some of those gains with higher domestic use in Wednesday's World Agricultural Supply and Demand Estimates report.

However, USDA did not lower export expectations which may be coming in the months ahead.

“USDA said small crops are done getting smaller,” said Arlan Suderman, chief commodities economist for the StoneX Group, pointing out the production and use forecasts for both corn and soybeans are all higher.

Corn production is forecast at 13.93 billion bushels, up 35 million from last month on a 0.4-bushel increase in yield to 172.3 bushels per acre. Feed and residual use are higher based on a larger crop. With supply rising more than use, USDA raised corn ending stocks 10 million bushels.

Soybean production is forecast at 4.35 billion bushels, up 33 million on higher yields. Higher yields in Iowa and Missouri account for most of the change in production. Soybean crush is raised 10 million bushels on an increased domestic soybean meal disappearance forecast. With exports unchanged, soybean ending stocks are raised 20 million bushels to 220 million.

Suderman said the surprise in the report was USDA choosing not to lower exports for corn and soybeans, which he anticipates USDA will have to do in the months ahead.

“Rationing is taking place on the export side because of the strong dollar and because of low water levels on the Mississippi [River],” he said.

The U.S. season-average soybean price for 2022/23 is forecast at $14.00 per bushel, unchanged from last month. The soybean oil price is also unchanged at 69 cents per pound. The soybean meal price is forecast at $400.00 per short ton, up 10 dollars.

USDA released 10-year baseline projections Monday and estimated corn acreage in 2023 at 92 million acres, up from 88.6 million acres in 2022, but lower than the 93.3 million acres in 2021. Soybean acreage is expected to hold steady at 87 million acres from 2023-2029, slightly lower than the 87.5 million acres in 2022.

When asked whether U.S. farmers will plant that many corn acres, Suderman said it will depend on how big Brazil’s safrinha crop, or second corn crop, is when it gets harvested in the next six to eight months. “If we don’t increase exports, any increase in corn acreage should be plenty ample, and we can start rebuilding our way out of this tight supply situation.”

Suderman said the weather Brazil will see for its safrinha crop coupled with whether or not grain continues to move out of Ukraine will be two of the main factors to watch going forward. As it relates to Ukrainian grain movement, Suderman explained exports are increasing at impressive levels, however, the question is whether those will continue beyond Nov. 19, the current expiration date of the Black Sea Grain Initiative.

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“Ships are going to increasingly become wary of going into there if they don’t have some type of quick assurance that the agreement is going to be extended,” Suderman explained of the ongoing discussions between Ukraine, Turkey, United Nations and Russia on moving grain through the region’s ports.

Suderman said winter wheat acreage in Ukraine may be down as much as 40% overall, and fertilizer use will drop due to those fewer acres. “We very well could see Ukraine no longer be a major exporting force in the year ahead if we continue to see the declines in production.”

The WASDE report revealed stable supplies for U.S. wheat, increased domestic use, unchanged exports and slightly lowered ending stocks.

Global wheat supplies are projected up 1.3 million tons to just over 1 billion based on increases in beginning stocks and production. Specifically, the WASDE report signaled expectations for larger production in Australia, Kazakhstan and the UK offsetting declines in Argentina and the EU.

Geopolitics are already recognized for their role in trade in the Black Sea region, but comments from Chinese President Xi Jinping, who recently addressed the country's military leaders and warned of potential military action, are also being noted by traders.

“We certainly are seeing things in China this week to suggest that the risk to commodity trade between the United States and China is escalating,” he said.

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