WASDE Recap: Bears Remain in Control

The monthly WASDE report contains projections for commodities in the United States and around the world

• The September WASDE report keeps the bear narrative alive.
• Wheat ending stocks declined, and corn ending stocks rose.
• Soybeans were put under pressure as the WASDE price forecast dropped.

The highly anticipated World Agricultural Supply and Demand Estimates—commonly referred to as the WASDE report and released by the World Agricultural Outlook Board (WAOB)—crossed the wires today and resulted in some notable moves across the commodities market. But there weren’t any huge surprises for any specific commodity.

What is the WASDE report?

The monthly report contains projections for commodities in the United States and the rest of the world. The National Agricultural Statistics Service (NASS) provides the data to the nine Interagency Commodity Estimates Committees (ICECs) that make the projections found in the report. The United States Department of Agriculture’s Foreign Agricultural Service also provides data it gathers from foreign agencies, along with broader weather and satellite data.

Wheat outlook

Wheat futures (/ZWZ3) initially declined following the WASDE, but prices were trading higher in the early afternoon session Tuesday, although the commodity remains near its lowest level since December 2020.

For the 2023/24 projection, the outlook is for stocks to decline from last month’s report, with a 7.2 million ton reduction to 1,054.5 million tons. While Ukrainian production grew, those gains couldn’t make up for production losses in Australia, Canada, Argentina and the European Union.

World ending stocks fell by 7 million tons to 258.7 million, the lowest since the 2015/16 season. U.S. ending stocks were unchanged at 16.75 million tons. The projected farm price for 2023/24 is unchanged at $7.5 per bushel.

While the report is slightly bullish for wheat prices, the commodity faces a tough technical path as it remains well below all its key moving averages. The price has been driven down by bumper wheat exports from Russia despite Moscow’s withdrawal from the Black Sea Grain Initiative.

Corn outlook

Corn futures (/ZCZ3) are being hammered following the WASDE as traders digest higher U.S. ending stocks, which increased in September by 19 million bushels to 2.2 billion on higher supply and unchanged demand.

The 2023/24 season-average corn price for producers was unchanged at $4.90 per bushel. While Ukrainian production is seen higher, it failed to overcome declines across the European Union (EU). The WASDE report puts world ending stocks up 2.9 million tons to 314 million.

Corn prices broke down from a pennant pattern following the WASDE, with prices breaching the pattern’s support level. The measured move—gauged by the pattern’s widest point—would put a target at around 447.

Soybeans outlook

Soybean futures (/ZSX3) are trading down 1.5% following the report. U.S. ending stocks fell 25 million bushels from 245 to 220, with lower beginning stocks and production influencing the figure.

While the report increased its average farm price for the 2023/24 projection from last month to 12.9 from 12.7 per bushel, that is still below the current comparable trading price in front-month futures. That projection could weigh on sentiment in the coming months. Overall, it’s a slightly bearish to neutral report for /ZS.

Prices for /ZS are trading around its 50-day simple moving average (SMA) and are among the most volatile of the three products discussed in this article over the last 30 days. A break lower if traders decide to follow through with selling could threaten the 100-day SMA, which is a likely scenario in my view, given that ending stocks didn’t decrease as much as needed to support current prices.

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater 

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