- HEADLINES: USDA raises US stocks, lowers Argentine production; Feb WASDE lacks market-changing data.
- The USDA’s February WASDE leans mixed, but like most years the report lacked statistical fireworks and S American weather stays priority number one into the middle part of March. Range bound trade will continue into at least the release of USDA Outlook Forum data in late February. Rising US end stocks cap rallies; falling Argentine production estimates lend support.
- US corn stocks were lifted 25 million bu amid lower projected ethanol production, which is USDA simply aligning with the pace of output to date, namely the steep year-on-year drop in production autumn and early winter. Otherwise, the US corn balance sheet was left untouched, though we fear another modest downward revision to exports in March or April. Like ethanol grind, it will be difficult for exports to catch up given commitments as of Feb 2 were down 42% from the previous year.
- US soybean stocks were raised 15 million bu to 225 million. 2022/23 crush was lowered a like amount based on pace analysis. NOPA/Official crush has fallen below year-ago levels in each of the last two months despite enlarged margins. Capacity will be expanded but monthly data must show a decently sized year-on-year increase beginning in spring. Exports were left unchanged.
- US wheat stocks were raised 1 Mmillion bu. Higher projected seed disappearance was offset by reduced milling demand.
- Argentine corn production was lowered another 5 million mt amid weak vegetation health/crop ratings and following a string of reduced forecasts from the major grain exchanges there. Argentine corn production is now pegged at 47 million mt, vs. initial estimates in late 2022 of 55 million. Argentine exports were lowered 3 million mt, feed use 2 million mt, and major exporter corn stocks/use was trimmed to 8.1%, vs. 8.3% in Jan and 8.6% in Dec. Large Brazilian/US production is needed in 2023.
- Argentina’s soy crop was lowered 4.5 million mt to 41 million, the lowest since 2017/18. Crush was lowered 1 million to 38 million mt, unchanged from the previous year, and Argentina is forecast to be a net importer of soybeans worth 3.8 million mt. Argentina last year was a net exporter of 2.1 million mt. Brazilian soy production was left untouched at 153 million mt. Combined S American soy production in 2023 will be up 26 million mt. Exports will be up 17 million mt, with crush up 2.4 million mt from last year.
- The market anxiously awaits the complete arrival of Brazil’s soy crop, but a steadily weakening Brazilian cash market is expected to lead Chicago futures lower during the spring months.
- World wheat stocks were raised 900,000 mt amid larger projected production in Russia and Australia. USDA is unwilling to adopt Rosstat’s 100+ million mt Russian output figure but raised production there 1 million mt amid larger spring wheat harvested area. Australian wheat production was increased 1.4 million mt to a record 38 million mt. Russian exports were lifted 500,000 mt to 43.5 million mt. Aussie exports were also raised 500,000 mt to a record 28 million mt. Competition for late season importer wheat demand will stay intact, which will act to challenge rallies at $7.60, spot Chicago, and $9.00, spot KC.
- Global ag futures have largely shrugged off new USDA data. We believe that late Feb/early Mar weather conditions in Argentina will be the primary driver of daily/weekly row crop price determination, while rising Black Sea tension and the end of round 2 of the Black Sea export corridor in mid-March lingers in the background for wheat markets worldwide.
- El Niño is expected by May/Jun. A record large Brazilian crop is likely given current soil moisture abundance there and as climate guidance keeps a pattern of above-normal precipitation in place across Central Brazil into March 13.