The June World Agricultural Supply and Demand Estimates (WASDE) report has officially been released, sparking widespread discussion across the agricultural sector regarding its implications for the upcoming marketing year. To break down the numbers and understand what these adjustments mean for producers, Farm Director KC Sheperd recently sat down with Rich Nelson, the Chief Strategist at Allendale. The conversation provided a detailed look at how minor shifts in old crop demand, international production adjustments, and ongoing weather patterns are shaping the current market landscape.
When asked about initial reactions to the data, Nelson noted that the timing of this particular report typically lends itself to a quieter market response.
“You know, overall, keep in mind for this June supply and demand report, this often does not see major surprises,” Nelson said. “This is mainly an old crop report for corn and soybeans at least, where we’ll see some minor changes as far as demand. Keep in mind for the new crop, USDA is very reluctant to make acreage or yield changes on this report.”
Wheat Production and Global Cushions
The most significant developments in the June report emerged within the wheat complex, where consecutive adjustments have drastically altered the supply outlook.
“Bigger focus for today, certainly on the wheat end of things here,” Nelson emphasized. “We will get some finalized old crop wheat stock numbers at the end of this month with that Grain Stocks report on June 30. As for the new-crop side, the focus was on production, and the USDA lowered its prior views on production even more than in May. So keep in mind as far as this lower Hard Red Wheat production number, this is now at numbers we haven’t seen, I want to say going back for about 70 years or so at least. And that’s mainly due to the fact that we have seen some lowered acreage in the past.”
Nelson further highlighted how these revisions are constricting the domestic balance sheet, driving carryout expectations to multi-year lows.
“The major focus for our report is USDA’s shockingly low Hard Red numbers from last month; they were revised yet again this month,” Nelson said. “So we have a relatively tight balance sheet here, and that was certainly reflected with an ending stock change of—762 last month, now 744. For all wheat combined, this is still the lowest ending stock number we’ve seen in about three to four years.”
Given the persistent production challenges facing Hard Red Winter wheat, Sheperd questioned whether the USDA has fully accounted for the scope of the damage, or if further cuts are on the horizon.
“I think they have captured it myself, and a lot of producers certainly in the Plains would have a strong argument with me on that question,” Nelson answered. “But, you know, keep in mind, USDA does have a very steep cut in terms of their viewpoint for abandonment right now. We’re looking at numbers we haven’t seen in about 20 years, specifically the percentage of crop not harvested. And USDA also has a quite low yield number estimate plugged in. So, it’s not that it’s a bad crop; it’s certainly a very poor crop. The question is the exact finalized low number there.”
With the domestic wheat supply tighter than usual, attention turns to how the international market might absorb the shortfall. Nelson indicated that global cushions are also experiencing their own tightening cycle.
“One thing which we’ve got to put some context into this is the fact that the overall world balance sheet for wheat has been lightly rained in recent years,” Nelson explained. “We’ve got ending stocks, or stocks-to-use on a world basis at least, that we haven’t seen for about eight years or so. So it is a moderately tight world picture. A lot of us may suggest this probably will not be a price-moving factor just yet.”
Nelson pointed out that international production uncertainty remains high across several key exporting regions.
“We have some questions about this crop out of India, which has been harvested,” Nelson said. “We have questions with Australia, which was slightly lower today, but we also have questions with Argentina. And certainly for that Australia question, that’s an El Niño dryness story, which does give us a dry perspective for that Southeast Asian region. So we’ll see if those numbers do change in the future reports.”
Corn and Soybean Balancing Acts
On the corn side of the ledger, the USDA introduced moderate adjustments to old crop demand metrics. Nelson explained that these shifts essentially neutralized each other, leaving the final carryout projections steady.
“We did see USDA make some moderate changes to old crop demand,” Nelson noted. “Exports were raised a little bit, which was offset by some lowered ethanol. So we saw the numbers on the corn side of the old-crop balance sheet left almost unchanged—2.1 billion bushels. As far as new crop corn, no changes there to speak of, so really no major surprises there.”
However, international adjustments injected a slightly more negative tone into the broader corn complex.
“We will lean lightly bearish for this report, given the fact that they did raise Argentina’s crop by a good 2 million tons, Brazil by 3 million tons,” Nelson added.
For soybeans, the baseline domestic numbers experienced very little volatility, though some of the USDA’s adjustments raised questions among market analysts.
“Soybean numbers on this report, well, they were all left unchanged,” Nelson said. “Old crop stocks left at 340 million bushels. USDA kind of threw us a little surprise: crush was raised, as expected, but exports were lowered. And given the past four weeks of positive exports, we’re not quite sure if that was needed.”
Looking forward, the focus on soybeans is quickly shifting to the adequacy of new-crop ending stocks, especially when weighed against current yield expectations.
“The big question for us right now on the soybean side, especially, is with USDA’s relatively low-looking new crop ending stock number—310 million bushels,” Nelson stated. “The big question here is, are we trading above trend yields right now? Keep in mind that the USDA is using trend yields on their balance sheet, and a lot of us have questions about this China buying story for the new crop, as we’ve only seen some moderate purchases so far. So, the market is trading a little larger ending stocks than USDA would give us here.”
Geopolitical Factors and Trade Relations
Beyond production statistics, macroeconomic and geopolitical factors continue to influence agricultural trade lanes. Sheperd raised the topic of the United States-Mexico-Canada Agreement (USMCA), asking if trade discussions would begin to play a more prominent role in market performance.
“That’s an interesting question,” Nelson noted. “Trump did, in terms of yesterday and today, kind of rain in his hopes for getting a USMCA deal. He basically said that he’s not too interested in it. Mexico and Canada will certainly try to keep this deal set together as well. So we’ll see if any changes do come up there, but certainly from a trade perspective, this is going to be one big question. Keep in mind for us on the wheat side, almost all of our imports do come south down from Canada, so that will be moderately market-moving news, especially for wheat, if changes are seen.”
Cotton Constraints and Drought Revisions
The cotton market mirrored many of the trends seen in row crops, with old-crop demand adjustments preceding anticipated new-crop acreage updates.
“Cotton is kind of just like the corn and soybean story at this point in the year,” Nelson observed. “We’re seeing old crop changes that are still in place. And as far as new crop, they’ll make some adjustments for acreage at the end of this month, and of course, they left yields unchanged, which is relatively normal for this report.”
The defining narrative for the cotton complex remains the severe environmental stress encountered during the planting window.
“There’s going to be a lot of questions regarding that new crop cotton perspective, especially as we’re questioning how many of those acres were planted with something else because planting was done obviously in a significant drought,” Nelson explained. “I believe 83% of cotton ground was rated in that D1 to D4 drought rating, so a lot of questions regarding what type of acreage changes we will see.”
Despite these challenges, the current data points toward an increasingly restricted supply situation.
“For this report, though, we really just saw a minor drop in terms of old crop ending stocks,” Nelson said. “New crop, with USDA’s view of a lowered production for this new crop year, this would still be the tightest new crop ending stock in about three to four years. So, a lightly tightened picture—we’ll see if that does continue.”
Sheperd agreed, noting the operational hurdles producers face on the ground. “We’re still waiting on some rain here, so I know that some folks are trying to kind of dust it in, but we’re hoping that we can even get it in the ground at this point.”
Livestock Production Shifts
Turning the focus to livestock, the June report left headline beef production estimates relatively stable, while maintaining a clear long-term trend regarding international trade flows.
“One big question as far as us on the cattle side, we’ve seen some minimal changes for USDA’s view on beef production,” Nelson said. “But in recent months, we have seen a sharp change in USDA’s viewpoint regarding imports and exports—and of course, higher imports and lower exports. That’s been seen almost every single report going back for, I want to say, about four or five months now.”
For this specific reporting period, the USDA elected to hold its ground on trade volume estimates, preventing any sudden market movements.
“Little positive for us at least on this report, USDA did not change those import numbers or export numbers too dramatically, at least for this report,” Nelson noted. “Keep in mind, as far as numbers on production, USDA still has a relatively moderate production drop this year, down about 2%. So we’ll see if this shortfall in beef production in the first half of the year is offset in the second half. Keep in mind that we will see placements in the coming months move and remain at or above last year’s levels. So, we’re not seeing a major change in production, but on a seasonal basis, we will see a slightly more cushioned supply in the second half of the year.”
Critical Data Points on the Horizon
As the industry processes the June WASDE data, attention is quickly shifting to a series of critical USDA data releases scheduled for the end of the month, which will likely dictate market directions through mid-summer.
“Boy, we’ve got a whole bunch of changes for all of these markets in these next two to three months,” Nelson stated. “Of course, at the end of the month, we’ll see some updates with the quarterly Grain Stocks report. That fills in the blank with what’s left over for old crop as of June 1. So, for corn and wheat, this tells us about the uncounted demand we call “feed residual” in the prior three months. So, we’ll have adjustments to old crop numbers.”
Simultaneously, the agricultural sector will receive highly anticipated acreage confirmations, though Nelson cautioned that June acreage data isn’t always the final word.
“On top of that, of course, the Acreage report on June 30 will hopefully solve a lot of questions,” Nelson said. “Now, I will kind of bring up the fact that last year was a big surprise for acreage. That didn’t come on the June 30 farmer survey; that came in August, when USDA began incorporating the farm program numbers into the acreage mix. So that’s another question: what will that August farm program acreage look like?”
Finally, as the growing season progresses, actual field observations will begin to replace trend-line assumptions, significantly impacting price-discovery mechanisms.
“Starting with the July reports and certainly going into August and September, we’ll have yield changes,” Nelson concluded. “For corn and soybeans, these markets right now are trading above trend yields. Of course, wheat will be a problem and a question, and certainly for the discussion on cotton, that will be a major mover with a lot of questions and certainly a lot of sway for these yield numbers in these months ahead.”
