- The USDA April Crop Report was bearish for soyoil/wheat, while being neutral corn/soybeans. The surprise was that WASDE lowered its Argentine soybean crop estimate by 7 million to 40 million mt, while they raised Brazil by 2 million to 115 million mt. The net decline was larger than expected which rallied Chicago soy futures. However, the industry has been talking an Argentine soy crop of 36-39 million mt for weeks, and we doubt that the soybean rally will last. We expect that Chicago will get back to focusing on weather and trade disputes. The USDA raised 2017/18 US corn end stocks by 55 million bu to 2,182 million bu. The increase in stocks was a result of a 50 million bu decrease in feed/residual use to 5,500 million bu, and a 10 million bu cut in the amount of corn used for glucose and dextrose, that was partially offset with 5 million increase in the amount of corn that is used for starch. Research would argue for another 50-75 million bu cut in US corn feed/residual use, with a like increase in US corn export estimates. This would leave 2017/18 US corn end stocks around 2,200 million bu with the average cash farm price placed at $3.35.
- 2017/18 world corn production was lowered by 6 million mt with a 2.5 million reduction to 92.0 million mt in Brazil and a 3.0 million to 33.0 million mt in Argentina. 2017/18 world corn end stocks were forecast at 198 million mt, down 1 million from March, and down 33 million mt from last year. No change was made to Chinese corn imports at 4 million mt or their 2018/19 stocks at 79.55 million mt. The world corn balance sheet was neutral and traders will be looking forward to the May WASDE which will offer their first estimate of the 2018/19 world corn estimates. US 2017/18 wheat end stocks were raised 30 million bu to 1,064 million bu via reduced feed and residual use to 70 million bu. This is an historically low US feed/residual use rate as more corn is utilised in US livestock rations. No other changes were made in the US wheat balance sheet, but we would argue that WASDE will cut its final US wheat export estimate by 10-20 million bu which will raise 2017/18 US wheat end stocks closer to 1,100 million bu by the final count. Such stocks are burdensome and reflects the tepid demand profile for US wheat with total use estimate under 2,000 million bu. World 2017/18 wheat stocks rose by 2 million to 271.2 million mt, a record high. The hefty world wheat stocks will mollify the cash rally as the market starts to worry about the sharp fall in the Russian Ruble and likely response by farmers to sell additional stored supply. Russian wheat exports were raised 1.0 million to a record large 38.5 million mt. Even amid last year’s record large 85 million mt Russian crop, their wheat carry in supplies will only be 2 million larger at 12.7 million mt. The world still has an abundance of old crop wheat to cap global prices.
- WASDE lowered their estimate of 2017/18 US soybean end stocks by 5 million bu to 550 million bu with a 10 million bu increase in the US crush estimate to 1,970 million bu and a cut in residual/seed use of 5 million bu. WASDE held its US soybean export estimate steady with March at 2,065 million bu. The sharp fall in the Argentine soybean crop will have more of an impact on 2018/19 US soybean exports (than the old crop) with the Brazilian soy crop reaching a record 115 million mt. The average farm gate price was left unchanged at $9.30. US 2018/19 soyoil stocks were raised to a 1,966 million lbs as more cornoil is used in biodiesel production. 2017/18 world soybean production was lowered to 90.8 million mt (down 3.6 million from March) as the Argentine soybean crop was cut a sharp 7 million to 40 million mt while the Brazilian soybean crop was raised 2 million to 115.0 million mt. World 2017/18 soybean production fell 6 million to 334.8 million mt. The sharp fall in WASDE Argentine soy crop estimate is rallying Chicago futures. However, such a crop has been rumoured for weeks and we doubt that the Chicago advance can be sustained. The US nor world balance sheet is surprising.
- The USDA April report does not offer much new information for traders. The sharp drop in Argentine soybean production has been telegraphed by the Argentine Commodity Exchanges for weeks. Our bet is the Chicago goes back trading weather and politics. The sharp fall in the Russian Ruble and our doubt that the Chinese trade tensions have ended should produce a volatile sideways Chicago trade. It is early to argue that US corn, spring wheat or soybean seeding will be altered significantly with US farmers to plant 40% of their corn or soy crop in a week.
To download our report data recap as a PDF file please click on the link below:
To download our report contemplations as a PDF file please click on the link below: