Friday the 8th was March Report day from USDA. Typical for the World Supply and Demand numbers for this month, changes are pretty minor. With quarterly stock estimates in a few weeks, USDA is generally reluctant to make any major changes to the balance sheet. Initial planting intentions will be released that day as well, and that’s more what the market is waiting for at this point. Below are the U.S. balance sheet numbers:
U.S. Balance Sheets 2018/2019 Carryout |
March | Trade | Last Month | Change |
Corn (bbu) | 1.835 | 1.736 | 1.735 | 0.1000 |
Soybeans (mbu) | 900 | 902 | 910 | -10 |
Wheat (mbu) | 1055 | 1020 | 1010 | 45 |
Corn markets saw a reduction to use of 100 mbu - 25 mbu due to slower ethanol grind and 75 mbu due to slower than expected exports in February. The U.S. got off to a quick start this year, largely as we shipped corn in place of soybeans off the PNW, but it looks like that quick start might have come at the expense of later sales causing USDA to overshoot the end estimate. Argentina and Brazil both have good looking corn crops and are expected to be very competitive price wise this year. USDA dropped their projected price range by five cents on both sides leaving an estimate of $3.55 with six months left of the marketing year
On soybeans, very minimal changes with crush increased by 10 mbu. Not a huge deal and not unexpected as you can see by the trade estimate above. USDA left exports steady with last month. Since then there have been some good sized Chinese sales booked for late summer. The market is likely to take a wait and see approach since those sales will often be rolled to the new crop year if it’s advantageous. Price projection was unchanged at $8.60.
On wheat, USDA reduced exports because of higher than expected competition in the HRS wheat and white wheat markets. Note that directly affects the HRS balance sheet, which took a hit going from 262 mbu up to 289 mbu, or just over a 10 percent increase. It also moves carryout back up to 51 percent compared to 37 percent at the end of the 2017/18 crop year. We are still moving quite a few more bushels into the export market than a year ago, but with production up sharply because of no drought, we need to do even more. USDA did not change their projected price on wheat, keeping it steady at $5.15. There are only two more months in the wheat marketing year, so confidence is increasing and the range of probable prices narrowed to $5.10 to $5.20.
Moving on to the more notable world carryout numbers:
World Balance Sheets 2018/2019 Carryout |
March | Trade | Last Month | Change |
Corn (bbu) | 308.53 | 309.06 | 309.78 | -1.25 |
Soybeans (mbu) | 107.17 | 106.33 | 106.72 | .45 |
Wheat (mbu) | 270.53 | 267.47 | 267.53 | 3 |
Nothing major here in corn or soybeans, just some slight numbers. As for wheat, USDA reflected a very recent and somewhat unexpected change in demand out of India. India is both a massive consumer and producer of wheat, and they tend to come and go in terms of the world market. Their government increased their projected balance by three mmt earlier on slower than expected disappearance out of the state reserves. That flowed through to USDA’s estimate (India had been rumored to be possibly looking to import, but the larger supplies means they won’t). The increase in world stocks was unexpected but likely priced in during the steep fall the past few weeks in wheat (HRW now trading less than Chi, both $1.10 to a $1.20 under Minneapolis at the time of this writing, which is extreme in terms of premium. Several areas in the Southern Plains are trading less than $4 cash on winter wheat bushels. The crop there by all accounts looks to be in good shape. Recall the winter wheat insurance price was set last September at $5.74. July KC wheat traded in the $4.30 range in the past few days.
Looking at South American specifically . . . .
South America | March | Trade | Feb | Last Year |
Brazil Corn | 94.5 | 94.66 | 94.5 | 82 |
Brazil Beans | 116.5 | 115.73 | 117 | 120.8 |
Argentina Corn | 46 | 45.92 | 46 | 32 |
Argentina Beans | 55 | 55.23 | 55 | 37.8 |
Good estimates on both Brazil and Argentina. Brazil’s soybean number was reduced, but not as much as expected. Corn estimate was steady but two-thirds of the crop is raised following beans and is just being put in the ground now. They remain competitive on a FOB port basis, but of course at least in China, the U.S. has a 27 percent tariff tacked on. There was enough of a disruption to transportation late February because of heavy rains and two ports are expected to run out of soybeans in the next few days. With that said, roads are opening up and a few day delay won’t be enough for Chinese buyers to switch origination outside of anything that already would have occurred.