Going into the March round of USDA supply and demand reports, the question was how big the cuts would be to Argentina's corn and soybean production estimates. As it turned out, changes were larger than expected with USDA's latest guess coming in at 36 million metric tons (1.42 billion bushels) for corn, as compared to last month's 39 mmt (1.54 bb). Soybeans were estimated at 47 mmt (1.7 bb), down from last month's 54 mmt (1.98 bb).
What's interesting, though, is how USDA accounted for projected changes in global demand for Argentina's decreased supplies.
Take corn for instance. The 3 mmt (118 million bushel) reduction in Argentine expected production led to decreases of 0.5 mmt (19.7 mb) of domestic feed and 2.5 mmt (98.4 mb) of exports, leaving its ending stocks unchanged at 5.27 mmt (207.5 mb). However, it's the lost export business that first caught my eye. What country is now projected to pick up not just all, but more than all of the slack created by a smaller crop in Argentina? If you guessed Brazil, you'd be wrong. Nope, that country's exports were left unchanged at 35 mmt (1.38 bb) despite the fact its production was only trimmed by 0.5 mmt (19.7 mb), much less than expected. Logic seemed to scream that Brazil would at least get some of the projected loss of business by Argentina. But, no, it all (and then some) is expected now to go to the United States.
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USDA's domestic corn exports guess jumped 175 mb, to 2.225 bb, despite the fact total export shipments in its own weekly export sales and shipments update released earlier in the day projected total demand of 1.839 bb. Something big, really big, is going to have to happen to U.S. exports over the second half of the 2017-2018 marketing year to reach the lofty goals now set by USDA.
Argentina's soybean situation is also interesting, with the lowered production guess of 47 mmt (1.7 bb) still well-above the 44 mmt (1.62 bb) estimates coming from within Argentina itself. Crush was lowered only slightly, from 43.68 mmt (1.60 bb) in February to 43 mmt (1.58 bb) in March, while Argentina's estimated soybean meal exports slipped from 31.2 mmt (1.15 bb) to 30.8 mmt (1.13 bb). Unlike corn, Brazil is expected to cover 1.5 mmt (55.1 mb) of Argentina's 1.7 mmt (62.46 mb) expected decrease in soybean exports, while the U.S. covers the largest part of Argentina's projected bean meal export decrease of 0.4 mmt (14.7 mb). Speaking of soybean meal, domestic (U.S.) crush was projected to increase by 10 mb, offsetting some of the 35 mb decrease in expected export demand.
Which brings us to a quick discussion on U.S. ending stocks. USDA upped its bid on domestic soybeans to 555 mb, quite possibly the largest monthly ending stocks estimate ever recorded (my monthly records don't go back beyond 2012-2013). Domestic corn ending stocks were lowered to 2.127 bb, due to the 175 mb increase in export demand and another 50 mb increase in ethanol demand for U.S. corn. Wheat -- poor wheat -- saw its ending stocks estimate climb 25 mb to 1.034 bb. That's a lot of wheat expected to be leftover at the end of the marketing year.
The bottom line is wheat is bearish. The numbers for soybeans could be viewed as neutral (bearish domestic ending stocks, bullish global ending stocks), and bullish for corn. Ultimately, it all comes down to exports, both from the U.S. and Brazil, and how Argentina's lost business actually gets carved.
Darin Newsom can be reached at firstname.lastname@example.org
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