8 March 2024

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  • HEADLINES: USDA avoids major balance sheet changes in March WASDE; Chinese soy imports raised; US winter warmest on record.
  • USDA’s March WASDE, as expected, is a statistical yawner. US wheat end stocks raised on lower exports, following another 110,000 mt cancellation from China this morning, while S American crop estimates left largely untouched. Old crop Chinese soy imports raised 3 million to a record 105 million mt.
  • The USDA’s Feb WASDE was released but largely ignored, with Chicago and global ag markets mixed at midday. Row crops are down slightly while Chicago wheat is higher in a reversal of Thursday’s trade. Wheat’s reaction to larger projected stocks and a second cancellation of previously purchased SRW by China suggests bearish input has been digested.

 

US End Stocks (million bu):

                    Feb        Mar

            2022/23    2023/24    2023/24

Corn            1,360        2,172        2,172

Soybeans        264        315        315

Wheat            570        658        673

  • The bulls are disappointed in USDA’s lowering of Brazilian soybean production by just 1 million mt to 155 million, which keeps global soy output in 2023/24 at a record 397 million mt, up 19 million year on year. Our work maintains a final Brazilian soy crop size of 142-143 million mt based on ongoing yield disappointment in Mato Grosso. Argentina soy production is unchanged at 55 million mt.
  • We also note old crop Chinese soy imports were lifted 3 million mt to 105 million based on shipping data from major exporting countries. China’s soy imports in crop year 2022/23 were increased 3.65 million mt to 104.5 million. It has been suspected all season that China had been underreporting monthly imports, which USDA has validated this morning. Modest growth in China’s demand for soy remains intact.
  • Otherwise, USDA’s Feb WASDE included just a tinkering with global balance sheets. Argentine corn production was increased 1 million mt. Ukrainian corn was lowered 1 million mt. Global stocks were trimmed slightly. The US balance sheet was left alone, with stocks pegged at 2.17 billion bu. USDA’s seasonal average corn price forecast was lowered $0.05/bu to $4.75.
  • The US soybean balance sheet, too, is unchanged from February. The season average price forecast is unchanged at $12.65. Global soy stocks were reduced 1.7 million mt to account for larger trade (China).
  • US wheat end stocks were increased 15 million bu amid lowered projected SRW and HRW exports. Weekly/monthly US wheat shipment data has been weak, but even accounting for recent Chinese SRW cancellations, US all wheat export commitments (669 million bu) sit at a near-record 94% of USDA’s new forecast. We view the downward revision as premature.
  • Global wheat stocks were lowered 600,000 mt as larger projected world trade offsets slightly higher production in Russia, Argentina and Australia combined.

Global End Stocks (million mt):

                    Feb        Mar

            2022/23    2023/24    2023/24

Corn            301.6        322.1        319.6

Soybeans        102.1        116.0        114.3

Wheat            271.1        259.4        258.8

  • The midday GFS weather forecast is again drier in northern Brazil in the 6-15 day period, and confidence is rising with respect to the coming lengthy period of below normal rainfall and above normal temperatures across a majority of Brazil’s safrinha corn belt. Enough rain falls in Mato Grosso nearby, but little/no rain and warmth are advertised in Parana, Mato Grosso do Sul and Sao Paulo. There are hints that better rain develops in north/northeast Brazil in very late Mar/early Apr, but the strength of Brazil’s monsoon in every year begins to wane beyond the middle of March. The lack of rainfall prior to this date is a concern. The Argentine forecast is favourable. Moisture reserves build further over the next 10 days.
  • The March WASDE has been digested. Key moving forward is whether funds maintain sizeable/near record short positions ahead of critical Brazilian weather and the N Hemisphere growing season. Winter in the US was officially the warmest on record, which boosts the chance of heat during the summer months. More attention is being paid to negative moisture anomalies and the lack of precipitation offered to the Central/Northern Plains, IA and NW Corn Belt into March 25. Fair value is all about weather.
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