9 February 2022

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  • HEADLINES: USDA report offers no statistical fireworks as they punt until March; China booking US soybeans; S American weather threatening.
  • Chicago futures are higher following the USDA February report with S American soy crop sizes falling a 3-country combined 8.7 million mt (on top of the record 9.5 million mt cut in January). And China is securing additional US soybeans while the midday Southern Brazilian/Argentine weather forecast stays arid. Chicago will look to S American weather, harvest yield data and CONAB on Thursday to help traders better evaluate S American drought losses in corn/soybeans.
  • At face value, the USDA February report was slightly bearish. WASDE only lowered US 2021/22 soybean end stocks by 25 million bu when the trade was expecting 40 million. And WASDE raised US wheat end stocks by 20 million bu to 648 million bu and left US 2021/22 corn exports alone at 1,540 million bu. It appears that with the USDA Annual Outlook Meeting in just 2 weeks, WASDE did not want to chop US old crop corn/soy stocks too aggressively with US export demand to grow in 2022/23.
  • WASDE left the 2021/22 US corn balance sheet alone with the only modification being in world corn production with a 1 million mt cut in the Brazil corn crop to 114.0 million. Shockingly, WASDE left their Argentine corn crop alone at a record 54.0 million mt. The average US farmgate corn price held at $5.45/bu and the March and April WASDE reports now take on added importance. We see the USDA as being too conservative and not sending the right profit signal to US farmers during the tabulation period for 2022 US summer row crop revenue insurance.
  • WASDE cut its estimate of 2021/22 US soybean end stocks by 25 million bu to 325 million. US 2021/22 soybean exports held steady at 2,050 million bu while crush was increased to 2,215 million bu (an increase of 25 million bu). WASDE estimated the 2021/22 US farmgate price at $13.00, an increase of $0.40/bu from January.
  • In S America, WASDE cut their estimate of the Brazilian soybean crop to 134 million mt (drop of 5 million from January), while estimating the Argentine soy crop at 45.0 million mt, a drop of 1.5 million. The Paraguay soybean crop was cut 2.2 million to 6.30 million mt. The combined 3 country soybean production cut was 8.7 million mt. This was on top of the record crop fall of 9.5 million mt in January. The total of 18.1 million mt has not (yet) altered US old crop soybean exports. WASDE must sharply elevate new crop US soybean exports due to the supply loss. We could easily argue that another 12-14 million mt of S American soy production cuts will occur in coming March/April reports.
  • The USDA’s Feb wheat data leans mixed, with US stocks lifted slightly on lower projected export total, while the exporter balance, surprisingly, tightened relative to January. US 2021/22 all-wheat end stocks are now pegged at 648 million bu, vs. 628 million in Jan. Exports were lowered 15 million bu to account for the pace of sales to date along with ongoing hefty Gulf premiums to other origins. Seed/food use was lowered a combined 5 million bu.
  • Yet, world wheat trade was hiked 2.3 million to a new record 206.7 million mt. Global wheat production was trimmed just over 2 million mt amid downward revisions made to crop sizes in Kazakhstan, the UK, and Middle East. Global stocks were lowered 1.7 million mt. Exporter wheat stocks were lowered a like amount and exporter wheat stocks/use is again pegged at a record low 12.8%, vs. 15.2% last year and vs. 13.1% in 2007/18. Additionally, the wheat market into spring will sustain large premiums to corn worldwide to cap feed use.
  • The USDA’s Feb WASDE was expectedly dull. WASDE is conservative and walks crop estimates downwards during droughts. WASDE will get it right, but it might not be until April or May. We expect CONAB to be more aggressive in lowering their Brazilian crop sizes on Thursday.
  • China is back securing US soybeans with unconfirmed rumours of interest in US corn off the PWN. We cannot confirm any US corn business to China, but we hear they are booking US soybeans for old and new crop this morning.
  • The USDA’s February crop data does nothing to change our bullish mindset with a deepening Argentine/S Brazilian drought to steal yield in the coming weeks. New crop US corn/soy futures must secure additional acres via price.
To download our USDA Recap as a PDF file please click on the link below: