The March World Agricultural Supply and Demand Estimates (WASDE) report -- expected to show modest declines in both U.S. corn and soybean ending stocks and declines in global ending stocks for both -- disappointed bullish traders, leading to an initial sell-off. Both corn and soybean ending stocks were pegged at unchanged from February, while traders had expected a drop in corn of 42 million bushels (mb). On the world front, ending stocks on corn rose by 1.2 million metric tons (mmt) and for beans, rose 340,000 metric tons (mt), with both expected to decline. Wheat global stocks fell by 3 mmt and were 3.8 mmt from the average trade estimate.
Here's a more in-depth look at some of the changes in both U.S. and world numbers from the March 9 report.
Not typically a big market mover, the March WASDE report did not disappoint this year. With the average Dow Jones pre-report estimate predicting a 42 mb decline in U.S. corn ending stocks, the carryout was instead left unchanged. The slight rise in U.S. corn exports that had been expected did not materialize; USDA chose to wait before making further cuts in South American production. Ending stocks on corn were pegged at an unchanged 1.502 bb.
On the world stage, both Brazil and Argentine corn production were left untouched at 109 mmt and 47.5 mmt, respectively. Prior to the report, traders had expected minor declines of 600,000 mt for Brazil and 400,000 mt for Argentina. Global ending stocks, expected to fall 1.2 mmt, instead rose by 1.2 mmt to 287.7 mmt (11.32 bb). There was no increase in corn imports by China, which some had expected.
The initial market reaction was a severe disappointment to bullish traders, which brought sellers into the market. Despite the unchanged South American production levels, there are private analysts who see both country's ultimate production possibly falling quite a bit more due to excess rain in Brazil, pushing safrinha corn planting past the optimal window and expanding drought in Argentina, but, at this time, USDA chose to allow more time to assess both of those crops. Soon after the report, the trade's focus reverted to the solid export pace and concerning weather in South America.
As in corn, the March WASDE results for soybeans held little fanfare. U.S. ending soybean stocks were left completely unchanged at 120 mb, while traders had expected a very small decline to 117 mb. Exports and crush were also left unchanged.
The world numbers were slightly bearish, with an increase in ending stocks to 83.74 mmt (3.08 bb) compared to 83.4 mmt in February and the average trade estimate of just 82.7 mmt. Part of the reason for this can be attributed to the unexpected revision for Brazil's 2019-20 soybean crop to a record large 128.5 mmt (4.72 bb) -- up 2.5 mmt. Offsetting much of that increase in production was a 2.1 mmt increase in world demand.
Brazil's 2020-21 production was increased by 1 mmt to a new record-large 134 mmt (4.92 bb). Argentina's bean crop was dropped by 500,000 mt, as expected, to 47.5 mmt. There are many who would likely disagree with those numbers, as heavy rains during harvest in central and northern Brazil and ongoing extreme dryness in southern Brazil and Argentina are likely to reduce those crops in future reports.
While the wheat section of this report was fully expected to be the least consequential, it was in wheat where some notable changes did actually occur. The U.S. wheat ending stocks level, as expected, was left unchanged at 836 mb. However, the hard red winter wheat ending stocks were raised by 21 mb to 383 mb, as exports were slashed. On the other side of the coin, solid demand from both China and South Korea, on U.S. white wheat, led to a rise in exports and a decline of 19 mb in ending stocks to 63 mb.
Globally, wheat ending stocks -- expected to rise modestly -- instead fell by 3 mmt compared to February to 301.2 mmt (11.06 bb); that was a full 3.8 mmt lower than the average trade guess. China's feed and residual demand for wheat was raised to a record-large 35 mmt (1.28 bb) -- up 5 mmt from February. Australia's wheat crop was raised by 3 mmt to a record-large 33 mmt (1.21 bb); that compares to the old record of 31.8 mmt. Also, Australian wheat exports were raised by 4.5 mmt and Canadian wheat exports were up 500,000 mt. Imports by China and Pakistan were increased, with China wheat imports moving to 10.5 mmt.
While global wheat production was figured at 776.8 mmt (28.5 bb), consumption soared by 6.6 mmt to 775.9 mmt. Much of this increase is attributed to China's feed increase, as wheat has been substituted for corn.
As most in the trade had anticipated, this report held few surprises, as USDA appears to be comfortable giving South America more time before making production changes there. The failure to drop U.S. corn stocks, though a bearish disappointment, still has the trade assuming that exports are underestimated.
Following the report, traders will once again focus on tightening supplies, a solid export pace on both corn and beans, and South American weather ahead. Traders will also look forward to the March 31 prospective seeding report.
Dana Mantini can be reached at firstname.lastname@example.org
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