WASDE Report Spurs Wheat and Corn Price Rally While Soybeans Lag
WASDE Report Spurs Wheat and Corn Price Rally While Soybeans Lag
Unfavorable weather in Russia with the harvest has reduced the export outlook for wheat
- Wheat and corn prices rose after the report.
- Soybeans prices took a hit after the initial upside reaction.
- Shorts are starting to feel the squeeze as prices rise.
Wheat prices get a bounce after WASDE
The United States Department of Agriculture (USDA) released its World Agricultural Supply and Demand Estimates (WASDE) yesterday. Grain markets reacted positively to the report initially, and wheat and corn prices continued to move higher into the weekend but soybeans faced some selling pressure.
Wheat prices (/ZWZ4) saw the biggest move today, rising over 2%. The WASDE report projected a 1.4 million tons drop in world wheat production to 796.9 million tons. However, ending stocks were raised, which kept the report mostly unchanged relative to the August WASDE.
Trouble in Russia with the harvest due to frost and other weather conditions has reduced the export outlook for the crop, with forecasts for this year dropping over the last several weeks despite strong trade in August. However, rising prices could inspire farmers in the region to release some of their crop, which they’ve held onto amid low prices.
Technically, wheat made a bullish break above a zone of congestion remarked by levels of previous resistance and support. The break above the 580 range, highlighted on the chart below, serves as a breakout into levels not traded since early July. A retrace down to prior resistance could see it turn into support, which would likely support the prevailing trend higher.
Looking at historical data for price reactions to the WASDE going back over the last five years show wheat has the most positive reaction to the report. While other factors are at play, the data supports what we are seeing today in the price reaction so far. The chart below illustrates the data. The move today aligns with the trade thesis we laid out this week on the tastylive program Options Trading Concepts Live.
Corn prices join rally while soybean prices disappoint
Corn got a bump because the 2023/24 ending stocks number came in below trade estimates at 1,812 million bushels vs. an estimate of 1,856 million bushels. The 2024/25 number came in essentially at the estimate, 2,057 vs. 2,007 million bushels.
Traders also believe the report didn't factor in the recent dryness we've seen, even though the USDA went into fields to measure yields for this report—a first for the WASDE. The Corn Belt in the United States has seen exceptionally dry conditions, and while we're past the point where dry conditions would do the most harm to the crop, it could affect yields for the upcoming harvest.
Soybeans came in slightly light on the ending stocks number, printing 340 million bushels for 2023/24 vs. the expected 341 million bushels. The 2024/25 projection printed at 550 million bushels, slightly below the estimated trade average of 565 million bushels.
The next big potential mover for wheat, corn and soybeans is the quarterly grain stocks report due from the USDA on Sept. 30.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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