- The USDA March crop report was deemed slightly bearish as US corn and soybean stocks failed to match the expectations of the market. Corn and soybean futures are lower while the wheat market is mixed with some degree of further fund purchasing.
- CBOT markets will now focus on the 31 March stocks and seeding report, US export demand, the Ukraine/Russian issue and spring weather and planting. We believe that rallies will be more difficult to sustain into this report as the trade fears bearish soybean seeding and corn stocks totals.
- WASDE raised 2013/14 export inspections by 25 million bu to account for the stronger sales pace since February. 2013/14 US corn exports are forecast at 1,625 million bu, which reduced end stocks to 1,456 million bu. One issue remains, that being whether China will ship 1.5 million mt of corn due to their strict testing for MIR 162, and whether or not other traditional importers of US corn will add to their current large forward positions.
- No other changes were made to US corn demand, and the stocks/use ratio edged to 11%. 2013/14 global corn stocks were increased slightly to 158.5 million mt, an increase of 1.2 million from February due to larger carry-in and imports.
- 2013/14 global corn production was increased to a record 967.52 million mt with crops in Argentina, Brazil and South Africa holding steady. China’s corn crop was increased by 700,000 mt to a record 217.7 million mt.
- US soybean exports were raised by 20 million bu to a record large 1,530 million bu. To balance the increasingly tight end stock position WASDE reduced the crush rate by 10 million bu to 1,690 million bu and increased imports by 5 million bu to 35 million bu. The result is a decline of 5 million bu in US soybean end stocks to 145 million bu and this gives a stocks/use ratio of 4.36%. Historically it has proven difficult for the ratio to drop below 4.3%, 1 March supplies appear to be bigger than last season, does this indicate a bigger crop?
- 2013/14 world soybean production was reduced by 2.26 million mt to 285.43 million mt, the decline being due to smaller forecast output in Paraguay and Brazil. The Brazilian harvest was estimated lower at 88.5 million mt, and with over 50% already gathered we would hope that this is an accurate representation. The Argentine crop was left unchanged at 54 million mt. Chinese imports for 2013/14 were left unchanged at the record 69 million mt level.
- Global soybean end stocks were reduced to 70.64 million mt on account of the reduced Latin American crop. It is of course possible that Brazil’s crop could lose another 1 million mt, but this could equally be offset by slower Chinese imports and/or a bigger Argentine crop. It appears almost a certainty that global end stocks will be 71 to 72 million mt, and South America will have a long export tail into late 2014.
- US wheat stocks were left unchanged at 558 million bu with no change in the balance sheet, it feels that the US wheat exports number is high, and as such we would ultimately anticipate a higher end stock figure. Global wheat and stocks were broadly unchanged at 183.81 million mt, the main feature of the figures was an increase in Australian output by 500,000 mt to 27 million mt. The last Indian crop was increased by just over 1 million mt to a record 93.5 million mt, although expected exports remain at 6.5 million mt.
- To summarise, the March report held little in the way of surprise to either supply or demand. We already knew that US soybean stocks were historically tight, additional price gains will have to be led by the cash market. Currently this market is under pressure from active farm selling as well as the thawing of principal waterways further north.
- It appears we may be seeing funds reducing some of their recent length, they need to decide on their stance going into the March stocks and seeding report.