OMAHA (DTN) -- We've reached the point of no return, seemingly, with the Argentine soybean and corn crops. With little to no rain over the South American summer (December-through-February), the only question now is how big the cuts are to the estimated Argentine production. Pre-report guesses averaged 48.1 million metric tons for soybeans, below last month's USDA guess of 54 mmt and well below last year's reported production of 57.8 mmt. As for corn, pre-report estimates averaged 36.3 mmt versus last monthly USDA's figure of 39.0 mmt and last year's 41.0 mmt.
USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CST Thursday.
If we consider South American soybean production as the sum total of Argentina and Brazil, the latter is expected to make up some of the loss seen in the former. Pre-report estimates for Brazil's soybean production came in at 114.0 mmt, as compared to last month's USDA guess of 112.0 mmt and in line with last year's 114.1 mmt. This week has seen private, local estimates come in closer to 118 mmt. USDA's WASDE number for Brazilian corn is expected to come in at 91.8 mmt versus last month's 95 mmt and last year's 98.5 mmt.
Where this could get interesting is in the March WASDE world ending stock numbers. Pre-report guesses averaged 95.5 mmt for soybeans, down from February's 98.1 mmt, but less than 1 mmt below last year's 96.1 mmt. How is this possible? Recall that both Argentina and Brazil have reported beginning stocks (last marketing year's ending stocks) well above what has been reported previously. For example, in its February WASDE USDA reported Argentine beginning stocks at 36.22 mmt versus the previous year's number of 31.6 mmt and the year before that's 31.7 mmt. Brazil's beginning stocks were held at 24.86 mmt as compared to 2016-17's 18.2 mmt and the previous year's 18.93 mmt.
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Despite what the market has been showing us lately, the world is not running out of soybeans. This year's ending stocks for U.S. soybeans are expected to come in at 529 million bushels (approx. 14.40 mmt), as compared to last month's 530 mb (14.42 mmt) and last year's 302 mb (8.21 mmt). If we do all the math with total expected losses in production of nearly 4.0 mmt, and decreases in world ending stocks of roughly 2.5 mmt, it would suggest slightly lowered expectations for world demand.
As I said before, though, the market is indicating a far more bullish situation than world ending stocks estimates would suggest. Strong commercial buying has been seen in soybean meal and soybeans, which implies global demand could actually be increased rather than decreased.
As for world ending stocks of corn, the average pre-report guess came in at 198.9 mmt, down from February's 203.1 mmt and last year's 229.8 mmt. Again, South American production is expected to be the key reason, with nearly 6 mmt of combined expected cuts for Argentina and Brazil from last month, down 11.5 mmt from last year.
Lastly, keep a close eye on projected demand for U.S. corn, soybeans and wheat. Given the weather problems in South America, it would not be surprising to see USDA hold tight to its projected export estimates, despite all three major grains running well behind projected pace. Also take note of domestic crush demand for both soybeans and corn (ethanol), though bearish changes in the latter aren't expected to be seen yet.
Editor's Note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CST Thursday, March 8, as he looks at the latest USDA Supply and Demand and Crop Production estimates and what they might mean for the markets. To register, visit http://bit.ly/…
|WORLD PRODUCTION (million metric tons) 2017-2018|
|WORLD ENDING STOCKS (million metric tons) 2017-2018|
|U.S. ENDING STOCKS (million bushels) 2017-2018|
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