- The USDA March crop report was viewed as bullish corn and neutral to bearish on soybeans and wheat. Funds were buyers on the initial Chicago break, and corn appears to be leading the charge higher at midday. Soybeans and wheat are lagging amid larger than expected US and world supplies. We look for a mixed Chicago close.
- The surprise of the USDA WASDE was the big increase in 2017/18 US corn exports of 175 million bu. The industry had expected a 50 million bu bump due to smaller Argentine/Brazilian production. However, WASDE decided to make a bigger adjustment which is catching the marketplace by surprise. Along with a 50 million bu increase in US ethanol demand, total 2017/18 US corn demand was raised by 225 million bu, which dropped 2017/18 US corn end stocks to 2,127 million bu. Such stocks are adequate with the annual US farm price raised up $.05 to $3.35/bu. However, remember that WASDE was forecasting a decline in 2018/19 US corn end stocks to 2,272 million bu. Subtracting 175 million bu due to enlarged old crop use would drop US new crop corn stocks to 2,097 million bu with planted acres of 90 million acres and a yield of 174.0 bushels/acre. An export adjustment is also needed in our opinion.
- If US 2018/19 US corn exports are adjusted upwards by 150 million bu, 2018/19 US corn end stocks would fall to 1,950 million bu, a stocks level that would place heightened importance on 2018 Central US weather and yield prospects. World 2017/18 world corn stocks fell to 199 million mt, the first time that world corn stocks have been below 200 million mt since 2014/15. The stock fall included an Argentine corn crop of 36 million mt and a Brazilian of 94.5 million. It is feared that the Argentine corn crop could still drop another 3-6 million mt (to 30-33 million) with CONAB estimating the Brazilian corn crop at 87.3 million mt. The point is that additional US corn export increases likely are ahead in future WASDE reports. The price range for spot Chicago corn futures is raised to a range of $3.70- 4.05 until more is known on US corn seedings and the spring seeding progress. The corn market is trying to prod producers to plant additional 2018 acres.
- The USDA reduced 2017/18 US wheat exports by 25 million bu to 925 million. US wheat sales and exports have been lagging as Russian exports continue to gain. US hard red winter wheat exports were reduced 15 million bu and spring 10 million based upon their noncompetitive price levels. The reduced US wheat export pace allowed WASDE to cut the average US cash wheat price to $4.65 with US 2017/18 US wheat end stocks rising to 1,034 million. World wheat 2017/18 supplies were increased 500,000 mt due to a larger crop in Kazakhstan. Russian wheat exports are projected at 37.5 million mt, a record and 35% more than the prior year. Russia’s share of world trade is also a record. 2017/2018 world wheat end stocks are record large at 269 million mt which will act as a supply cushion for any new crop weather problems. Russia will be carrying in a record wheat stocks total of 14 million mt!
- Further rallies in Chicago wheat will have to be based on adverse weather. We doubt that spot Chicago wheat can push too far above $5.25-5.50 resistance without adverse Black Sea weather. The Plains dryness will continue to get attention, but losses elsewhere in the world are needed to spur a more bullish wheat landscape. Research sees spot Chicago wheat in a range of; $4.50-5.25.
- The USDA raised 2017/18 US soybean end stocks to 555 million bu, up 25 million. WASDE dropped US 2017/18 US soybean exports by 35 million bu and raised crush by 10 million bu to a record large 1,960 million. The average cash price to be received by farmers stayed the same at; $9.30. The Brazilian soybean crop was increased 1.0 million mt to 113 million mt, down 1 million from last year’s record, while the Argentine soybean crop fell 7 million mt to 47 million. The net was a 6 million mt fall in S American soybean production. World 2017/18 soybean end stocks fell to 94.4 million mt, down 3.8 million from the February forecast. China’s soybean exports were left at 95 million mt, which has been a steady forecast for many months. We would note that the Argentine crush estimate was cut to 43 million mt with Argentine soybean exports to fall to 6.8 million mt from 8.50 million. We look for further fall in the Argentine soybean crop of 4-6 million mt, which will further constrain Argentine crush/exports this summer. We doubt that May soybeans can reach $10.80-11.00 resistance with futures trading in a range of $10.30-10.80 into the March 31 US Planting Intentions Report. Longer term, a lasting bearish trend can only occur with a new crop US soybean yield of 50 bushels/acre or more, which won’t be known until late summer.
To download our WASDE data recap as a PDF file please click on the link below:
To download our WASDE contemplations as a PDF file please click on the link below: