- The USDA’s April Crop Report held slightly bearish surprises for corn/wheat, while being neutral for soybeans. However, macro/financial forces via a rise in crude oil (20 billion barrel/day OPEC/Russian cut) along with the massive monetary stimulus provided by the US Central Bank has produced a supportive Chicago tailwind. A US$ drop has sparked fund managers to be post report buyers. We forecast a firm/mixed close, but we doubt that any end user will chase the rally. Until corn/soybean seed enters the ground in an abundant fashion, xc xb is likely to stay rangebound.
- WASDE elevated 2010/20 US corn end stocks to 2,092 million bu (gain of 200 million) with farmgate prices falling $0.20/bu to $3.60. WASDE raised US corn 2019/20 corn feed/residual use rates by 150 million bu based on the March Stocks data which reflected stronger than expected quarterly feed consumption. However, WASDE also cut US ethanol use by an unprecedented 375 million bu to 5,050 million bu due to stay at home orders and a 43-47% decline in unleaded gasoline consumption. US 2019/20 corn exports were left unchanged at 1,725 million bu.
- Research argues for a further 100 million bu drop in US corn ethanol grind to 4,950 million bu and a 50 million bu cut in US corn exports to 1,675 million.
- Latest research is not willing to embrace the USDA 2019/20 feed/residual use forecast with livestock feeding profitably declining sharply in the post Covid-19 landscape. The outlook is for a further rise in 2019/20 US corn stocks and an additional lowering of the farmgate price to $3.50/bu.
- WASDE raised 2019/20 world corn end stocks to 303.2 million mt, a gain of 6 million mt from March. Such stocks are down only 17 million mt from last year. The 2020 Brazilian corn harvest was left unchanged at 101.0 million mt with Argentina at 50.0 million. Both crops would argue for US export challenges beyond May. China’s corn imports were left unchanged at 7.0 million mt, which meets its WTO entry obligation.
- US 2019/20 soybean end stocks were raised by 55 million bu to a more adequate 480 million bu with a 50 million bu cut in exports to 1,775 million bu with the residual dropping 24 million to just 5 million bu. The average farmgate price was lowered to $8.65. Research argues that WASDE is still 50-75 million bu too high with its 2019/20 US soybean export estimate amid pace analysis. A further hike in US soybean old crop stocks is forecast to 530-555 million bu. Such stocks will cap rallies in July soybeans at $8.85-9.00 without adverse US weather threats.
- World 2019/20 soybean end stocks fell to 100.5 million mt, a decline of 2.5 million. The Brazilian soybean crop was lowered by 1.5 million mt to 124.5 million, while the Argentine soybean crop fell by 2.0 million to 52.0 million mt. The fall of 3.5 million mt of S American soybean production is seen as supportive to the complex. We look for another 1.5 million mt in Brazil and 500,000 mt for Argentina.
- The US wheat balance sheet was loosened slightly from March. The USDA slashed feed use 15 million bu to 135 million followed weaker than expected feed/residual disappearance in the Dec-Feb quarter. The recent plunge in cash corn prices across the Plains will also weigh on wheat feeding into summer.
- US wheat exports were lowered following a slowing of world trade and cheaper EU/Black Sea offers through the duration of the old crop marketing year. US all wheat stocks were lifted to 970 million bu, vs. 940 million previously. Old crop US HRW Stocks were raised 19 million bu to 503 million. HRW stocks will decline in 2020 but will remain more than abundant with normal weather.
- Global wheat stocks were raised 5.6 million mt to a new record 292.8 million mt. World stocks less China were raised 3.5 million mt from March to 142.4 million. The primary theme in USDA’s updated global numbers is lower than expected feed use. Feed use was cut in China and Europe, while total Indian domestic use was lowered 1.9 million mt. 2019/20 world wheat trade was lowered 0.9 million mt. Black Sea weather remains priority number one longer term, but there is no shortage of wheat currently.
- The USDA’s April WASDE lacked market-moving data, but rather better quantified the pace of soybean and wheat exports to date as well as accounted for the recent collapse in biofuel margins. Oversupply will be the dominant theme in 2020 with normal weather.