USDA Reports Review

The April 9 World Agricultural Supply and Demand Estimates (WASDE) report featured larger-than-expected U.S. corn, soybean and wheat ending stocks numbers. The report also saw a greater-than-expected increase in both global wheat and corn ending stocks. The soybean world ending stocks fell by 2 million metric tons (mmt) from March, mostly due to the 3.5 mmt combined fall in Argentine and Brazilian soybean production.

CORN

USDA's April corn numbers showed an increase in feed and residual by 150 million bushels (mb) to 5.675 billion bushels (bb). The implied December to February disappearance was up 4% versus a year ago. However, corn used for ethanol was slashed by a huge 375 mb to 5.050 bb due to the sharp fall in gasoline and ethanol demand related to stay-at-home directives to slow the spread of the coronavirus. Fortunately, despite U.S. corn export commitments still being 23% below a year ago, exports were left unchanged. The net effect was to raise U.S. ending stocks to a larger than expected 2.092 bb, 200 mb higher than the March carryout and roughly 100 mb higher than the Dow Jones survey had projected.

The season average farm-gate price was lowered 20 cents per bushel to $3.60.

On the global front, corn-ending stocks, expected to rise modestly, instead rose by 5.8 mmt to 303.17 mmt (11.9 bb) from 297.3 mmt in March. The majority of the world ending stocks increase was due to the U.S.

Both Argentine and Brazil corn production were left unchanged at 50 mmt (1.98 bb) and 101 mmt (3.98 bb), respectively, despite dryness expected to adversely affect both crops. Ahead of the report, corn futures were virtually unchanged, and finished 1 3/4 cents higher for the day, as traders may already have the sharp fall in demand penciled into prices.

SOYBEANS

U.S. soybean ending stocks rose to 480 mb. This was up 35 mb from the average Dow Jones estimate and 55 mb above the March ending stocks number of 425 mb. Domestic soybean crush rose by 20 mb as soymeal demand has been elevated due to good crush margins and the tight stocks of competing dried distillers grains (DDGs), as ethanol production has taken a huge hit due to the COVID-19 stay-at-home directives. Export sales were reduced by 50 mb, as sales remain 15% lower than a year ago (due to cheaper and plentiful South American supplies, the sharp fall in both the Argentine peso and Brazilian real, and the decline in demand related to the spread of COVID-19). In future reports we could see a further decline in U.S. exports in the absence of some major Chinese phase-one buying.

Seed use declined by 2 mb, while feed and residual fell by 24 mb.

On the world front, the declines in both Argentine and Brazilian soy production was pretty much expected. Brazil (down 1.5 mmt) and Argentina (down 2 mmt) combined production fell by 3.5 mmt, comprising much of the 3.7 mmt drop since March. It is possible that we could see a further decline in Brazil's soy crop due to southern dryness. World ending stocks were revealed at 2 mmt lower than in March, at 100.45 mmt (3.69 bb). Another positive on the world front was an increase in expected China soy imports by 1 mmt to 89 mmt (3.27 bb), and perhaps a good sign for U.S. phase one sales this summer.

Soybean futures prices moved little from where they were before the report. May soybeans were up 8 cents prior to the report and finished the day 8 1/4 cents higher.

WHEAT

Wheat feed and residual was lowered by 15 million bushels (mb) and exports were lowered by 15 mb, also on the slowing pace of new export sales and shipments. The net effect of those changes was to raise U.S. wheat ending stocks by 30 mb compared to March to 970 mb, and 25 mb higher than the average trade estimate of 945 mb.

The larger change was on the world numbers as world ending stocks rose to 292.8 mmt (10.76 bb) compared tp 287.1 mmt in March. The unexpectedly large 5.6 mmt (206 mb) rise in ending stocks came mostly from a sharp decline in world wheat consumption. China consumption was reduced 2 mmt, Indian consumption was down 1.9 mmt and EU consumption off 1 mmt. A decline of 1.5 mmt in Russian wheat exports was offset by a like increase in the EU, while U.S. exports were lowered 400,000 mt (15 mb).

The wheat market, despite the bearish results of the report, were not affected at all. Prior to the report, Kansas City spot futures were up 13 cents and finished 14 cents higher.

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

Follow Dana Mantini on Twitter @Mantini_r

(BE/BAS)

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