May 10 / Alef Dias and Thais Italiani

Post-WASDE Monthly Report - 2024 05 10

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"Comments about the results of USDA's report"

Soybeans: USDA confirms ending stocks rebuilding scenario

Figure 1: US Soybeans - Ending Stock (M bu)

The 24/25 supply and demand balance for soybeans in the US is giving the bears a leg up on the CBOT. Even with greater demand for soybean crush and exports in the US, new crop stocks are projected to be higher, reinforcing the bearish tone we have been signaling. This is a reflection of ample supply and still modest demand growth in the USDA's view.

There are two points to note here: 1. there is room for greater export demand given that the 23/24 harvest in South America is smaller than the USDA's reading; 2. the use of soybean oil for biofuels is what has been driving soybean processing in the US, any hiccup in this industry, which comes from a scenario of tight margins, tends to reflect directly on the soybean balance sheet.

In South America, the USDA has begun to adjust its 23/24 reading for soybeans and corn in Brazil and Argentina, but it is still well above the local readings. For the new crop, 24/25, the optimism about Brazil's production potential stands out: 169M mt of soybeans.

More details at:

Corn: US stockpiles tighten more than expected 

Figure 2: US Corn - Ending Stock (M bu) USDA's first figures for the new 24/25 corn crop in the US, despite indicating an increase in stocks compared to 23/24, came in below market expectations.
This calls for attention, since the production reading considers a very optimistic level of crop yield: based on the historical trend from 1988 to 2023, normal planting and regular summer weather conditions in the country. It should be remembered that in recent cycles, the USDA has overestimated corn’s yield.

As for South America, it's another cycle that begins with high expectations for corn production in Brazil and Argentina: 127 and 51M mt, respectively.

More details at:

Wheat: USDA gets ahead of the arket in Russia

Figure 3: US Wheat - Ending Stocks (M ton)

As for wheat, the USDA presented lower estimates for practically all the main figures for the 24/25 crop, providing strong support for wheat contracts this Friday.

Starting with the American balance, expected production for the next harvest stood at 50.6M mt - still above last season (49.3M mt), but below the median of market estimates (52.1M mt), reflecting the worsening of harvest conditions in recent weeks. The USDA also made a slight adjustment to its estimates of domestic demand and beginning stocks on the 24/25, resulting in ending stocks that are also tighter than expected by the market - but still a little more comfortable than in the 23/24 cycle.

Looking at the global balance, the USDA pointed to another year of tight stocks. In addition to cutting estimates for the 23/24 crop by 0.5M mt, the first figure for the 24/25 crop came in almost 5M mt below the median of market estimates. Despite expectations of growth in global production, lower carryover stocks and increased demand have contributed to tighter stocks.

On the global supply side, certainly the most surprising figure was Russia's production for 24/25, estimated by the USDA at 88M mt. Although not an absurd figure, given the adverse weather faced by Russian wheat in recent weeks, it was certainly not expected that the agency would anticipate local consultancies, which still work with estimates above 90M mt. Despite the smaller harvest, the American agency still expects Russia to be very important on the global market, exporting 52M mt in the 24/25 harvest.

More details at:

Charts Legend

WASDE Commentary — Grains

Written by Alef Dias

Written by Thaís Italiani


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