The March USDA World Agricultural Supply and Demand Estimates (WASDE) report was not expected to be a market-mover, as it is typically less volatile than the January report, which was released in combination with the February report due to the government shutdown. Although there were some surprises, the futures price action post-report resulted in little change. Shortly after the report, soybeans renewed their bearish move lower, fueled not only by bearish supply-and-demand news, but also fund and technical selling. Despite the bearish change to both corn and wheat markets, the post-report price move was negligible, as it appears that bearishness was already factored into prices.
Key changes in the report were a higher-than-expected reduction in both U.S. wheat and corn exports. Following some minor tweaks in wheat imports and feed use, and an expected decline in corn for ethanol usage, wheat ending stocks rose 45 million bushels (mb) and corn ending stocks were up 100 mb from February -- primarily on expectations of slowing demand due to lower-priced competitors.
Closing futures prices as of March 8 had May corn down 1 cent per bushel and December corn down 1/2 cent. May soybeans were down 6 3/4 cents and November beans were down 6 cents. Chicago May wheat was up 1 1/4 cents, while Chicago July wheat was up 2 1/2 cents. Kansas City May wheat was up 3 1/4 cents per bushel, with new-crop Kansas City July up 3 1/4 cents. Minneapolis May wheat was down 3 3/4 cents, with new-crop September down 2 3/4 cents on increased spring wheat carryout of 27 million bushels, and new crop.
Here is a closer look at USDA's latest estimates:
U.S corn ending stocks were raised by 100 mb (greater than expected) to 1.835 billion bushels (bb) versus an average pre-report trade estimate of 1.755 bb. The combination of a 25 mb reduction in corn used for ethanol to 5.550 bb and a 75 mb reduction in U.S. exports to 2.375 bb led to the gain. While most expected ethanol to move lower, few expected such a large decrease in exports. That was likely attributed to much larger and cheaper South American supplies. The season average price received by producers was lowered 5 cents to $3.55 per bushel.
U.S. sorghum exports were lowered by 15 mb to 85 mb -- the lowest since 2012-13 -- and sorghum used for ethanol was lowered 5 mb. Offsetting that was an increase of 20 mb in feed and residual.
World corn production was raised for India and lowered 500,000 metric tons (mt) to 11 million metric tons (511.7 mb) for South Africa. Corn exports were raised for Argentina (up 1 mmt) and Ukraine (up 500,000 mt) as U.S. exports were lowered. China's ending stocks fell by 3 mmt (66.1 mb) -- all attributed to higher feed usage. The net effect is that world ending corn stocks fell by 1.25 mmt from February to 308.53 mmt (12.1 bb).
In addition to the 100 mb increase in U.S. ending stocks, should the WASDE projections for South America be realized, they would have production of 26.5 million metric tons (1.043 bb) more than last year.
There were few changes in U.S. soybeans, with the 10 mb increase in domestic crush leading to the 10 mb decline in U.S. ending stocks to a still-record and burdensome 900 mb -- close to what was expected pre-report.
World soybean stocks increased by nearly 1 mmt to 107.17 mmt (3.94 bb), with a decrease in Brazilian soy production of 500,000 mt to 116.5 mmt (4.28 bb) and a decrease in China's crush of 1 mmt. China imports were left unchanged. There are many in the trade who are doubtful that such a pace can be achieved with the ongoing spread of the African swine fever and its demand impact, as well as the ongoing trade issues with China, the top soy importer.
The net effect of the March report for soybeans -- though the changes were small -- reinforces the ongoing saga of huge supplies.
The March USDA report led to a 45 mb larger ending stocks number than expected -- about 20 mb higher than pre-report estimates. The increase was comprised mostly of a reduction in U.S. wheat exports by 35 mb, with the other 10 mb gain from an increase in imports of 5 mb and a reduction of 5 mb in food use. The season average farm price range was narrowed to $5.10 to $5.20, down 10 cents on the high side.
World wheat ending stocks were raised by 3 mmt to 270.53 mmt (9.94 bb), with India's decrease in consumption of 3 mmt being primarily responsible for the change. Larger EU and Brazil exports were offset by lower U.S. exports. Lower production forecasts for both Iraq and Kazakhstan were also featured.
The gist of the USDA report on wheat was overall bearish as U.S. carryout approaches a surplus 1.1 bb. However, the recent 90-cent drop in futures prices in the past four weeks has likely already factored in the missed opportunities for U.S. wheat exports, hence the higher close on report day.
Dana Mantini can be reached at Dana.Mantini@dtn.com
Follow him on Twitter at @mantini_r
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