- The March USDA Report is normally non-inspiring and today’s report followed without any surprise. Chicago is unmoved following the report and price direction will go back to focusing on the macro markets and potential slowing of the world/US economic outlooks.
- WASDE left 2019/20 US wheat, corn, soybean end stocks unchanged from February at 940 million bu, 1,892 million bu and 425 million bu, respectively. The “no change” was not a surprise, but the pressure will be growing on WASDE to cut us corn and soybean export estimates aggressively in coming months based on pace analysis. Ahead the April WASDE, NASS will release their Stocks/Seeding Report and it is not unusual that WASDE analysts pass on making any sizeable adjustments until after March. WASDE did lower their farmgate price estimates 5 cents in corn and soybeans at $3.80 and $8.70/bu. WASDE held the US wheat farmgate price at $4.55. Importantly, farmgate cash averages are below current Chicago bids which is acting to cap rallies.
- WASDE did raise both the Brazilian and Argentine soybean crop estimates by 1 million mt (126/54 million mt) taking world soybean production to 341.8 million mt, down less than 1.0 million from last year’s record. The world has an abundance of soybeans.
- We note that 2019/20 world soybean end stocks were raised to 102.4 million mt (up 3.5 million), which is only down 9.5 million from the prior year’s record. WASDE held China crop year soybean imports at 88.0 million mt, up 5.50 million from 2018/19. China has been a larger importer of soybeans this year for political reasons and restocking of reserves following the US/China trade war.
- USDA forecast 2019/20 US soybean end stocks at 425 million bu. WASDE did raise US soyoil exports by 200 million pounds to 2,100 million pounds, but end stocks held steady as biodiesel production was reduced. Research argues that US 2019/20 soybean end stocks will be raised at least 150-200 million bu as US soybean exports are cut. Research does not expect that China will import large quantities of US soybeans until late summer or autumn. The increase in US old crop soybean stocks will cap rallies in May futures above $9.00.
- 2019/20 world corn end stocks were raised to 297.3 million mt, up 0.5 million from February. The Brazilian and Argentine corn crops were left unchanged at 101.0 million mt and 50.0 million mt, respectively. China’s 2019/20 corn imports were unchanged at 7.00 million mt, 2.5 million more than the prior year. We estimate that China has secured 3.5 million mt of world corn, leaving potential demand of 3-3.5 million mt.
- World wheat stocks were a record large 287 million mt, down slightly from February. The Australian wheat crop was cut to 15.2 million mt from 15.6 million. World wheat exports were raised 800,000 mt to 183.6 million mt. The world wheat balance sheet came as no surprise as WASDE waits to gauge future demand /trade.
- The DOW opened 945 higher but has given back most of those gains heading into the midday hour. Wild swings are expected in world financial markets until there is certainty that the Covid-19 virus threat has waned. Investors are not willing to chase a US financial rally amid the weakness of crude oil and the unknow surrounding how the US will handle Covid-19. The Italians, who have a very good health system, are failing miserably on controlling the virus.
- The midday GFS weather forecast is consistent. Shower chances will increase across Argentina today and into Southern Brazil during the weekend. The 11-15 day forecast calls for improving rain chances for all of Central and Southern Brazil. No extreme heat is noted which favours crops.
- USDA March reports can be boring, and todays’ report was no exception and lacked any fanfare. Chicago will go back to trading strong Midwest cash corn bids against a background of waning export demand. Argentina has dropped its July fob corn offer to 25 cents over vs the US Gulf at 62 cents. Argentine corn $0.38/bu cheaper in July. And the US FAS ag attache raised their forecast of China 2019/20 corn stocks to a record large 223 million mt. This is up 11.5 million from February, which WASDE could soon incorporate in their own balance sheets.
- Chicago outlook stays weak on slowing US export demand, the demand loss on coronavirus amid weakening GDP, and a 2 million mt larger S American soybean crop with Brazil and Argentina production rising to a record 180 million mt. China is booking additional Brazilian soybeans for June today.