USDA Reports Review

Friday's USDA World Ag Supply and Demand Estimates report (WASDE) featured some bearish news for corn and wheat; but those markets seemed more concerned about weather and the situation in Ukraine, shrugging WASDE off to move higher. Soybean numbers in the report were about as expected, but the complex also rallied sharply.

Let's look at each commodity.

CORN

With many looking for an increase in U.S. corn exports due to Ukraine's inability to ship out corn, USDA disappointed the trade, leaving exports unchanged at 2.5 billion bushels (bb) and ending stocks unchanged at 1.4 bb. USDA lowered feed and residual use by 25 million bushels (mb) and raised corn for ethanol use by 25 mb, which left stocks untouched. USDA chose not to raise corn exports, despite the sharp fall in Ukraine exports. The season average price on corn was raised by 15 cents to $5.80 per bushel. As is typical, USDA seemed somewhat conservative, awaiting more information on the impact of the Russia-Ukraine conflict and South American weather.

On the world front, the focus was mostly on Brazil and Argentine production and on Ukraine exports. Traders were looking for a slight increase in Brazil corn production, and they got that, with Brazil production, expected to be up 1.2 mmt, moved 2 mmt higher to 116 mmt (4.57 bb). Traders were looking for a 1.1 mmt lower Argentine corn crop, and USDA chose to leave that unchanged at 53 mmt (2.08 bb). European Union corn was raised by 700,000 metric tons (mt) to 70.5 mmt (2.78 bb). China imports were lowered by 3 mmt to 23 mmt (905 mb). On feed use, Brazil and Canada were down 500,000 mt and 400,000 mt, respectively, and China feed use was lowered by 3 mmt to 211 mmt (8.3 bb). Ukraine feed use was estimated to be 2.3 mmt higher at 12 mmt (472 mb).

Ukraine exports were lowered 4.5 mmt from a month ago to 23 mmt (905 mb). That may still be way too high, based on the longevity of the war, as Black Sea ports remain compromised. Brazil corn exports were raised by 1.5 mmt to account for higher production, and Canada's corn exports were increased by 800,000 mt to 1.8 mmt (71 mb). World ending stocks were up by a much-larger-than-expected 4.5 mmt to 305.5 mmt (12 bb).

What appeared to be bearish changes for corn on the April WASDE report were quickly forgotten, and corn was back trading weather and Russia-Ukraine. May corn looks to have possibly broken out above a bull-flag chart formation, and new-crop December once again reached a new contract high for the fifth time in the past seven trading sessions.

SOYBEANS

For soybeans, WASDE began with an increase in beginning stocks of 1.4 mmt due to a higher 2020-21 crop in Brazil of 139.5 mmt (5.12 bb).

On the domestic side, only minor changes occurred, with U.S. exports raised by 25 mb to 2.115 bb, which could ultimately still be way too low. U.S. soybean export commitments are already just 27 mb below the prior USDA estimate with 21 weeks left in the marketing year. Soybean seed use was increased by 4 mb to 106 mb. With traders looking for ending stocks of 254 mb, USDA pegged stocks at 260 mb -- down 25 mb from March.

World changes focused on South America, with WASDE once again very conservative in lowering Brazil soy production by just 2 mmt to 125 mmt (4.59 bb) -- still 2.6 mmt above the recent CONAB estimate. Paraguay soy production fell to just 4.20 mmt (154 mb) due to severe drought, down from 9.9 mmt a year ago. Argentine soy production was left untouched at 43.5 mmt (1.6 bb), with Dow Jones traders' estimate at 42.6 mmt.

Soybean imports fell by 700,000 mt in Argentina to 2.2 mmt, and China imports were again dropped by 3 mmt to just 91 mmt (3.34 bb). That is down from 99 mmt a few years ago and likely a combined result of COVID-19, weak hog prices and poor crush margins. Soybean crush in China was also reduced by 3 mmt to 89 mmt (3.27 bb), while Brazil's crush was pegged at 47.25 mmt -- up 1 mmt from March. Brazil soybean exports were dropped by 2.75 mmt to 82.75 mmt (3.04 bb), and Paraguay's were down 700,000 mt to 2.90 mmt, both the result of drought-damaged crops. Global soy stocks fell by 400,000 mt to 89.6 mmt (3.29 bb) -- slightly higher than trade expectations.

Soybean futures prices finished 43 1/2 cents higher on spot May futures, with new-crop November soaring 29 cents. The strength is likely due to expectations for Brazil and Argentine crops to fall even further and for U.S. soybean exports to rise as a result. It appears very possible U.S. exports could be understated by another 100 mb still. As a side note, world oilseed stocks, already tight, fell another 2.1 mmt from March to 104.3 mmt.

WHEAT

Wheat futures were not the primary focus for the April WASDE report, but the result was the same as corn and soybeans, with more importance placed on trader expectations rather than WASDE changes. The Russia-Ukraine situation and ongoing drought expansion in the Plains seem to be the primary price drivers both before and after Friday's report.

On the domestic side, the slow pace of U.S. exports forced USDA to once again lower U.S. wheat exports, this time by 15 mb. When coupled with a 10-mb drop in feed and residual use, U.S. wheat ending stocks rose more than expected to 678 mb. That figure is 25 mb higher than March and 24 mb above trade expectations. The export and feed reductions led to an increase in ending stocks of 10 mb for hard red and 15 mb for soft red winter wheat. Despite those changes, the season average price was bumped by 10 cents to $7.60 per bushel.

Despite the slightly bearish U.S. supply and demand impact, traders were looking for only minor world changes, with Dow Jones' survey expecting unchanged world ending stocks. Those stocks instead fell to a five-year low of 278.4 mmt (10.23 bb).

Argentine production rose by 500,000 mt to 21 mmt, leading to exports that are 500,000 mt higher. European production was lowered by 600,000 mt. EU feed usage was increased by 500,000 mt and India domestic usage of wheat, following a record-large wheat crop, was increased by 4.4 mmt.

Export changes include a reduction in EU exports by 3.5 mmt, a reduction in Ukraine exports by 1 mmt (37 mb), and a somewhat inexplicable increase in Russian wheat exports by 1 mmt. Argentine and Brazil wheat exports are up 500,000 mt and 800,000 mt, respectively, versus a month ago.

The net effect of the report on wheat was bearish domestically and slightly bullish on the global side; yet wheat finished 36 cents higher in Kansas City, as the Russia-Ukraine issue has bullish undertones.

FINAL THOUGHTS

The April WASDE report seemed to be quickly forgotten with traders much more bullish than WASDE numbers imply. The focus following the report seemed to shift back to Russia-Ukraine, South America weather and the continued arid outlook for Plains wheat areas.

Dana Mantini can be reached at dana.mantini@dtn.com

Follow Dana Mantini on Twitter @Mantini_r

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