Trade Deals and Yields Shape the Latest WASDE Outlook
- 6 minute read or Click here and save for later -
The WASDE is back
The World Agricultural Supply and Demand Estimates (WASDE) report was missing in October, but back for the month of November. Even before Congress voted to reopen the government Nov. 12, the November WASDE was slated for release Friday, Nov. 14. The United States Department of Agriculture (USDA) deemed the report an essential activity and called back staff to begin work on it well before the shutdown ended.
For corn, the U.S. outlook shows increased supply – due to higher stocks despite a slight lowering of forecast production – and increased use, mainly attributed to rising export demand. That said, supply increases were greater than demand increases in the report, resulting in a marginal rise in forecast ending stocks.
Let’s dive a little deeper into the corn production figures. Projected corn yield dropped by less than a bushel to 186.0 bushels/acre, while acres remained unchanged from September to November at 98.7 million planted acres and 90.0 million harvested acres. Compared to September, there was a slight drop to forecast total U.S. corn production, now at 16.75 billion bushels. This is still a gigantic crop. Despite all the corn, the WASDE’s season average corn price was raised 10 cents to $4.00/ bushel. Many traders expected the USDA to reduce forecast production more than reported, resulting in a faintly bearish and somewhat negative market reaction post-report release.
For soybeans, the U.S. outlook showed slightly lower supply and decreased use. On the supply side, this was attributed to a slight reduction in production and reduced ending stocks, and on the demand side, due to lower forecast exports despite the recent trade deals. Soybean crush demand remained unchanged. Projected soybean yield dropped 0.5 bushel to 53.0 bushels/acre. Just like for corn, acres remained unchanged from September to November. An estimated 80.3 million acres were harvested for a total predicted crop of 4.25 billion bushels of soybean production.
Since the last WASDE, and since the previous Economic Minute article, some key soybean-related events occurred. The biggest being a trade deal with China that included a commitment to buy 12 million metric tons (around 440 million bushels) of U.S. soybeans before year-end and another 25 million metric tons (nearly 920 million bushels) annually for the next three years. Following the trade deal news, soybean prices rallied to prices not seen since summer 2024. The WASDE’s season average price reflects the past several weeks of increased prices by raising the forecast soybean price 50 cents to $10.50/bushel.
But trade dynamics are complex, and the deal could have other ramifications. The WASDE states, “while U.S. soybean exports are expected to rise to China for the rest of the marketing year, these higher shipments could be offset by reductions to other markets where the United States no longer holds a large price discount compared to other exporters.” If the production numbers were the bearish news for corn, the export analysis was the bearish news for soybeans, with markets trending lower immediately following the WASDE release.
Beyond the export analysis in the WASDE, it is worth considering more broadly just how likely it is that China will fulfill the agreed upon soybean purchases in this latest deal. China did not achieve soybean purchases in the Phase 1 trade deal from 2019.
The government reopens and the Farm Bill is extended
On Nov. 12, the federal government shutdown resolved after 43 days. From an agricultural perspective, Congress included several key ag-related items in H.R. 5371, the Continuing Resolution to reopen the government. In addition to continuing to fund the government until Jan. 30, 2026, Congress attached three minibus appropriation bills that fund several agencies for a whole fiscal year: 1) USDA & Food and Drug Administration, 2) Military Construction & Veterans Affairs and 3) Legislative Branch. In other words: if another government shutdown occurs post-Jan. 30, USDA – and offices like Farm Service Agency – would remain running because the minibus funds it until Sept. 30.
Further, another one-year extension of the 2018 Farm Bill was passed in the shutdown ending bill. That means this latest Farm Bill authorization is an extension of an extension of an extension. Add the extension from H.R. 5371 to the budgetary aspects of the Farm Bill passed in the OBBBA (H.R. 1) July 4, and the next year of the farm safety net has taken shape.
The Federal Reserve kept to the “no surprises” trend in October
As a self-funded federal governmental agency, the Federal Reserve remained open with regular operations during the government shutdown. Except for partially missing macroeconomic data, the Fed had minimal disruptions despite the shutdown as they headed into the Federal Open Market Committee (FOMC) meeting at the end of October. Most notably, the Fed missed out on the Bureau of Labor Statistic’s September Jobs Situation report that would ordinarily have been available in early October.
Keeping aligned with the pre-meeting expectations, the FOMC made one cut to the federal funds target rate, dropping the short-term fed funds rate from 4.00-4.25% to 3.75-4.00%. In the press release explaining their reasoning, the Fed cited “downside risks to the employment have rose,” nearly the exact same wording used by the Fed to explain their one cut to the federal funds rate six weeks earlier in September.
At their October meeting, the Fed also announced that after six months of slowing down their reduction of treasuries securities, they’d end the reduction process Dec. 1. This means when the calendar rolls to December, the Fed will be neither growing the size of the government’s balance sheet (known as quantitative easing or QE), nor reducing the size of the government’s balance sheet (known as quantitative tightening or QT). QE stimulates the economy but can increase inflation, while QT is meant to slow down the economy and was used as a tactic to try to reduce the high post-COVID era inflation. This most recent round of QT was announced all the way back in January 2022 before being implemented in May 2022.
While the monetary policy decisions at the September and October meetings were unsurprising, what comes next is a bit more of a surprise. In total, the Fed has now missed a Personal Consumption Expenditures (PCE) inflation index (the most recent PCE inflation data shows inflation slightly elevated at 2.7% in August), two Jobs Situation reports (the most recent jobs data shows unemployment at 4.3% and jobs growth slower at 22,000 jobs in August), and a Gross Domestic Product update. As governmental data becomes available again, the Fed will be watching it closely.
Will there be a cut or not? I could argue Fed Reserve Chair Powell would agree with the assessment that the December FOMC meeting could go either way; he stated during the October press briefing that another rate cut in December is “not to be seen as a foregone conclusion – in fact, far from it.” So, stay tuned.
You can also tune in to our next AgriMindset webinar on November 19 at 1 pm CST, which is focused on consumer trends in food buying. I’ll be joined by Anna Meyer, senior intelligence analyst at The Directions Group where we’ll talk about how current economic conditions are matching up with consumer food preferences and trends to create new dynamics in consumer demand. If you can’t join live, you can also watch (or listen) to a recording at any time or listen to the AgEdge podcast version a day later wherever you get your podcasts.
The information provided is accurate to the best of the author’s knowledge at time of publishing. It is presented “as is” with no guarantee of completeness, accuracy or timeliness, and without warranty. The information is educational in nature and not investment, legal, accounting, tax or other advice of any kind.
