USDA Reports Preview
Looking South
OMAHA (DTN) -- I was all set to open this USDA Reports Preview with this statement: "With few changes expected in domestic ending stocks numbers, all eyes will be on USDA's new estimates for South American production." But then I saw pre-report estimates, and there seems to be a U.S number traders might find interesting.
USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CST Thursday.
Take a look at expected U.S. ending stocks, soybeans in particular. Note that pre-report estimates ranged from a whopping 540 million bushels (mb) to a low of 455 mb. I'll also point out that this is actually a tighter pre-report range than last month's ridiculous 595 mb to 425 mb. This month the average came in at 492 mb, a number that, if realized, would be just 3 mb short of USDA's high guess for this marketing year from back in June 2017.
So how might USDA add 22 mb to its January ending stocks estimate? With the whole world watching South American soybean production guesses, it seems an ample time for USDA to trim its domestic export number.
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Reducing export demand estimates seems reasonable, given the pace through the first five months of the 2017-2018 marketing year. As of its most recent weekly export shipment update (through Jan. 25), total soybean exports were 1.223 billion bushels (bb). Given that shipments average approximately 66% completed at that point of the marketing year, one could project total exports to come in at 1.853 bb through the end of August. USDA's January projection was 2.160 bb, so a 20 mb decrease in its February round of reports seems trivial, but also possible. Keep in mind USDA already trimmed its soybean export estimate by 65 mb in January.
If a continued decrease in U.S. export demand is seen, it will most likely be replaced by increased demand for Brazilian soybeans. The average pre-report estimate for Brazil's production came in at 111.4 million metric tons (mmt), up 1.4 mmt (51.4 mb) from USDA's January estimate but still down 2.7 mmt (99.2 mb) from last year. What will be interesting will be expectations for Brazil's exports and Argentina's imports. The latter (Argentina) is expected to see its soybean production cut 2.2 mmt from last month, a change that would be 4 mmt less than last year. As of January, Argentina's imports were left unchanged at a standard 1.7 mmt while Brazil's exports increased 1.5 mmt to 67 mmt (2.462 bb).
Traders will also keep an eye on corn production in both Brazil and Argentina, with decreases of 1.5 mmt expected for both. If realized, it would add to the concern over potential weather damage to both crops, and would provide some explanation to the recent weakening of the carry in old-crop corn futures spreads. If so, USDA isn't likely to reduce its domestic corn export projection despite the fact reported shipments so far this marketing year point to total export demand of 1.754 bb as compared to USDA's demand projection of 1.925 bb.
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Editor's Note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CST Thursday as he looks at crop production in South America and USDA's latest WASDE estimates. To register, visit http://bit.ly/…
| WORLD PRODUCTION (Million Metric Tons) 2017-2018 | ||||||
| Feb. | Avg. | High | Low | Jan. | 2016-17 | |
| Corn | ||||||
| Brazil corn | 93.5 | 95.0 | 87.1 | 95.0 | 98.5 | |
| Argentina corn | 40.5 | 42.0 | 39.0 | 42.0 | 41.0 | |
| Soybeans | ||||||
| Brazil soybeans | 111.4 | 113.0 | 110.0 | 110.0 | 114.1 | |
| Argentina soybeans | 53.8 | 56.0 | 51.0 | 56.0 | 57.8 | |
| 2017-18 | 2016-17 | |||||
| Wheat | Feb. | Jan. | Feb. | Jan. | ||
| European Union | 151.60 | 145.25 | ||||
| FSU - 12 | 141.27 | 130.48 | ||||
| WORLD ENDING STOCKS (million metric tons) 2017-2018 | ||||||
| Feb. | Avg | High | Low | Jan. | 2016-17 | |
| Corn | 204.3 | 208.0 | 198.9 | 206.6 | 228.8 | |
| Soybeans | 98.6 | 100.5 | 97.0 | 98.6 | 96.5 | |
| Wheat | 267.8 | 269.7 | 265.0 | 268.0 | 252.7 | |
| U.S. ENDING STOCKS (million bushels) 2017-2018 | ||||||
| Feb. | Avg | High | Low | Jan. | 2016-17 | |
| Corn | 2,467 | 2,550 | 2,377 | 2,477 | 2,293 | |
| Soybeans | 492 | 540 | 455 | 470 | 302 | |
| Sorghum | 23 | 26 | 20 | 24 | 33 | |
| Wheat | 993 | 1,014 | 974 | 989 | 1,181 | |
Darin Newsom can be reached at darin.newsom@dtn.com
Follow Darin Newsom on Twitter @DarinNewsom
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