- The USDA December Crop Report was slightly bearish corn/wheat, but neutral on soybeans. WASDE raised US 2018/19 wheat end stocks by 25 million bu and US corn stocks by 50 million bu by cutting demand. WASDE cut its US 2018/19 US corn ethanol production by 50 million bu and US wheat exports by 25 million bu based on pace analysis. WASDE made no change on US soybean exports as there has been no announcement of Chinese reserve purchases under the Argentine G20 deal. WASDE will not forecast policy changes. WASDE told the industry in November that no additional Chinese demand was included in their 2018/19 US soybean export forecast. We doubt that the impact of the December WASDE report will be long felt as traders refocus on Chinese demand for US ag products.
- The USDA raised 2018/19 US corn end stock forecasts to 1,781 million bu based on a 50 million cut in US corn ethanol production to 5,600 million bu and a 5 million cut in US corn imports. US 2018/19 corn imports are estimated at 45 million bu. The average farmgate corn price was left unchanged at $3.60/bu.
- 2018/19 world corn end stocks were raised by 1.3 million mt to 308.80 million mt. The stock increase was based on the US increase due to reduced ethanol production. WASDE left S American corn production estimates unchanged at 94.50 million mt in Brazil and 42.50 million mt in Argentina. Following last month’s sizeable Chinese stocks revisions, no changes were made. Ukraine corn production was raised to a record large 35 million mt with exports rising to 28 million mt. We note that 2018/19 world corn end stocks are down 31 million mt from last year, even with record large US, Ukraine and Chinese corn yields. A further fall in world corn stocks are projected in 2019/20 based on demand growing faster than supplies.
- US 2018/19 soybean end stocks were left at 955 million bu with no change in supplies or demand. US 2018/19 soybean exports were left at 1,900 million bu. The average cash farmgate soybean price was estimated at $8.50. World 2018/19 soybean stocks were raised to a record large 115.3 million mt based on the Brazilian soybean crop being raised to 122 million mt and the Argentine crop holding at 55.50 million. WASDE held China’s soybean imports steady at 90.0 million mt. The larger Brazilian soybean crop went right to the bottom line of stocks. We note that world total soybean demand held steady at just over 351.5 million mt.
- US 2018/19 wheat end stocks were raised 25 million bu to 974 million based on a cut in US wheat exports to 1,000 million bu based on pace analysis. US wheat exports have been slowed due to record large Russian wheat exports. WASDE raised Russian wheat exports to 36.5 million mt due to its ongoing aggressive export pace. USDA assumes that the export pace will persist with Russian wheat end stocks falling to an untenable tight 5 million mt. We doubt that Russia will export more than 34 million mt due to tightening supplies in SE Russia and the unwillingness of the Russian Government to subsidise wheat transit from Siberia.
- The midday S American weather forecast remains consistent with recent model runs with below to much below normal rainfall for N Brazil and soaking/flooding rains for portions of Argentina. Temperatures look to average near to above normal with highs ranging from the mid 80’s to the mid 90’s while cloud cover keeps Argentina cooler than normal.
- Will China keep its promise and secure large amounts of US ag goods? Our view is that Chicago values won’t be able to sustain a decline very far until China has bought US ag goods!. That demand should be close nearby. The December WASDE report held few surprises. Our view is that wheat is bottoming and soybeans are nearing a sales opportunity.