- 2018/19 will see a tighter global outlook according to the International Grains Council (IGC) in their latest update. They forecast a 46 million mt year on year , the lowest level in four years decline in stocks to 560 million leaving stocks to use ratios similarly lower. Stock levels in major exporting countries is also forecast to reduce some 29 million mt from last year to 145 million mt. Global wheat output in 2017/18 was forecast to drop 17 million mt year on year to 741 million whilst corn consumption was seen to grow 20 million mt to 1,094 million leaving corn stock levels 43 million mt lower at 265 million, the lowest figure in four years.
- Kansas wheat has maintained strength this morning amid drier Plains forecast, and as US drought conditions are unchanged despite early week rainfall in Kansas. Otherwise, markets are mixed and near unchanged. Details surrounding some $50-60 worth of tariffs targeting China are imminent, but are not yet available. Technology/intellectual property will be the focus. There is a debate ongoing between concern over future Chinese interest in agricultural products and China’s needs for soybeans in the near/medium term, which cannot be supplied by S America alone. We doubt much clarity will emerge on Chinese trade for some time. Note that tariffs will take affect only after a period of public comment.
- Informa Econonics’ monthly update today features a modest downward revision in new crop US corn seeding, and a boost to soy acreage. Corn acres this spring are estimated at 88.9 million, vs. 89.2 in Feb and the USDA Outlook’s 90. US soybean acres are pegged at a record 91.5 million, vs. 91.2 a month ago and the USDA’s 90. A slight shift from corn to beans makes financial sense. Assuming trend yields, bean stocks stay elevated in 2018/19, but there is a path to putting new crop US corn end stocks at 1.7-1.8 billion, vs. old crop stocks of 2.1-2.2. This is not overly bullish corn, but does suggest strong support will be available on breaks until July weather is better defined. New wheat acres are pegged at 46.1 million, vs. USDA Outlook Conference’s 46.5, which suggests a much smaller than expected expansion in spring acres. Also of note, a USDA attaché report on Wednesday pegged Mexican corn production in 2018/19 at 26.6 million mt, unchanged on the year. Carryover stocks will be down slightly, and assuming normal growth in Mexican feed consumption record imports of 17.0-17.5 million mt are required to keep stock levels steady. Mexico will be largest importer of corn. Another round of heavy snow will impact Central Russia over the next 5-7 days, and will also impact the Eastern European corn belt on the weekend. It remains unlikely that the N Hemisphere corn crop will be planted earlier than normal.
- The US$ at midday is up slightly. Spot crude is down $.60/barrel. EU milling futures settled unchanged, and the DOW is down 380 points. US corn and soy stocks as of March 1 will no doubt be record large, and as such we expect rallies to be capped at $3.85, May corn, and $10.40, May beans. Measuring new crop supply and demand is a bit more difficult, and whether soybean acreage really does expand above 90.0-90.5 million in the face of higher cotton and minor feedgrain prices will be key next Thursday.