- HEADLINES: February WASDE a touch negative; Market reaction muted so far; Soyoil rallies in tandem with crude.
- The USDA February Crop Report was slightly negative. WASDE reduced their estimate of the Brazilian 2024 soybean crop by 1.0 million to 156.0 million mt and cut their total Brazilian corn crop estimate by 3 million to 124.0 million mt. USDA is reducing their Brazilian crop production estimates (like CONAB), but at a much more measured pace. We look for additional cuts in Brazilian corn/soybean production due to unfavourable weather conditions and ongoing disappointing harvested yield data. RGDS, MGDS and Santa Caterina soy/corn crops have been stressed by recent heat/dryness, but the early harvest is only just beginning.
- The USDA will not get the Brazilian or Argentine crop sizes right until April/May. WASDE left their estimate of the 2024 Argentine corn crop at 55.0 million mt and the soybean crop at 50.0 million mt. Whether weeks of extreme heat took off the top end of production will not be determined until March.
- The USDA raised 2023/24 US corn end stocks by 10 million to 2,172 million bu. USDA left the 2023/24 average US corn farmgate price at $4.80/bu.
- World 2023/24 corn stocks fell 3.0 million to 322.0 million mt on a drop in production and modest decline in domestic demand. Estimated corn stocks were up 22 million mt from last year due to larger American and Argentine production. Ukraine’s corn exports were raised 2.0 million to 123 million mt and could be hiked another 2-3 million in future reports. World 2023/24 corn stocks must decline back near 300 million mt for longer term bullish price trends to be restored. The majority of world corn stock in the 2023/24 crop year is domiciled in the US.
- US 2023/24 soybean end stocks were raised by 35 million bu due to a cut in US soybean exports of a like amount. No other balance sheet changes were offered. The US soybean export pace has fallen behind on pace analysis and we would argue for an additional 10 million bu reduction. However, record large US soybean crush is forecast with an expectation that future WASDE reports will raise their crush estimate to 2,340 million bu. As a massive amount of renewable diesel demand comes online in the next 6 months, the need for soyoil grows.
- USDA elevated 2023/24 global soybean end stocks due to a sizeable 2.0 million mt jump in the 2022/23 carry in stocks, which was carried forward to arrive at 116.0 million mt. We forecast that world soybean supplies will decline in subsequent reports due to declining S American production. We would also argue for an expansion in world crush rates due to US and world soyoil demand. It is the Chicago close today that counts.
- USDA wheat data leans slightly bearish as WASDE trimmed US food use 10 million bu following milling data through December and as 2023/24 US exports were left unchanged at 725 million bu. US end stocks were raised 10 million to 658 million bu. USDA did hike global consumption and world trade 1.1 million mt but awarded this increase in demand to Ukraine and Australia. Ukrainian exports were raised 1 million to 15 million mt following the success of Ukraine’s humanitarian corridor in winter. Australian exports were increased 0.5 million mt amid lower projected feed use there. Other meaningful changes in world supply and demand were absent, with exporter stocks/use in February unchanged at 14.8%, vs. 16.0% in 2022/23. Russian fob is still offered at $225/mt for late winter arrival. This is a weight on the marketplace, though we note US export sales in the week ending February 1 totalled 13.9 million bu, 8.5 million above the pace needed to hit USDA’s target. US SRW export commitments now total 166 million bu, or 95% of USDA’s forecast. We maintain that USDA’s annual US export forecast is 15-25 million bu too low.
- The market’s reaction to another round of neutral/bearish USDA data has been muted, which suggests most bearish input has been digested, we estimate managed funds’ combined short in corn, soy and CBOT wheat at 476,000 contracts, the fifth largest on record, and focus turns to S American soy yields, the performance of Brazil’s monsoon during safrinha corn pollination in April and Northern Hemisphere seeding levels and dates. The spark needed to trigger and sustain short covering is absent today but reactions to supply surprises will be intense given the size of funds’ short today.