The April 9 USDA World Agricultural Supply and Demand Estimates (WASDE) report featured a slightly larger than expected cut in U.S. ending corn stocks to 1.352 billion bushels (bb), as exports, as well as corn use for ethanol, feed and residual, were all raised. Soybean ending stocks were left unchanged, despite a rise in export sales, while domestic wheat ending stocks came in a bit higher than expected due to a cut in feed and residual.
The trade was expecting the April WASDE report to reflect higher corn exports and a 136 million-bushel (mb) decline in ending stocks on rising corn exports. Instead, the ending stocks number fell to a slightly more bullish 1.352 bb, down 150 mb from March. The decline was comprised of a 75 mb rise in U.S. exports, 50 mb higher corn for feed use and a 25 mb increase in corn for ethanol usage. Exports rose to 2.675 bb, which many analysts feel is still way too low based on the current torrid pace, with sales already at 2.617 bb and U.S. corn still competitive with five months left in the crop year. Perhaps a bit more surprising was the decision to raise corn used for ethanol, which is certainly warranted, and for feed and residual. USDA's decision to raise exports makes it very likely that we will see future declines in ending stocks.
On the world front, there were few major changes. World ending stocks fell by roughly 3.9 million metric tons (mmt) from March to 283.85 mmt (10.4 bb). Ukraine corn exports were lowered 1 mmt to 23 mmt, while Argentina's corn crop fell by 500,000 metric tons (mt) to 47 mmt. Ukraine use of corn for feed was also raised by 1 mmt. The fact that China corn imports were left unchanged, at 24 mmt, was baffling to some, as the U.S. alone has sold them close to that. Traders also believe that China has booked as much as 7-8 mmt of Ukraine corn. With that in mind, more bullish China corn demand numbers could be in the cards.
The bullish combination of falling U.S. and world ending stocks were not enough to keep old-crop corn futures higher. Both May and new-crop December futures forged new contract highs prior to the report, but spot May ended up closing nearly 18 cents below the new high and down 2 1/2 cents for the day.
Despite the ongoing torrid pace of exports for U.S. soybeans, Dow Jones' pre-report estimates pegged ending U.S. soybean stocks at nearly unchanged. They ended up being right, with ending soybean stocks once again remaining at 120 mb. To arrive at that, USDA had to make some adjustments: Domestic crush was dropped by 10 mb, due to lower disappearance and higher extraction rates; U.S. exports were raised by 30 mb, while residual usage declined by 17 mb and seed usage fell by 2 mb. The unchanged ending stocks number certainly disappointed bullish traders.
World numbers showed a more bearish result than most traders had expected, with ending stocks rising by a greater-than-expected 3.2 mmt, to 86.9 mmt (3.19 bb). Notable changes were a rise in world production of 1.4 mmt, primarily due to Brazil, where soybean production was raised to a record-large 136 mmt (5 bb) from 134 mmt. In addition to the increased supply, there was also a fall in demand, with WASDE leaving China imports alone, but sending China crush lower by 2 mmt to 96 mmt. Following the report, May beans closed down 12 1/4 and meal dropped $5.60.
Soybean average cash price rose by a dime to $11.25, while meal was left unchanged and bean oil average cash price rose by 4 cents per pound to 45 cents per pound.
With pre-report estimates pegging ending U.S. wheat stocks at 849 mb, it instead came out at 852 mb -- 16 mb over the March carryout. Wheat imports were lowered by 10 mb.
With rumors of lots of wheat being substituted for corn in the Southern Plains, USDA's decision to cut domestic feed wheat usage by 25 mb was a baffling move. That change undoubtedly led to the 28 mb increase in hard red winter wheat ending stocks to 411 mb. Soft red winter wheat stocks fell by 5 mb and spring wheat stocks by 3 mb.
The world wheat numbers were perhaps the biggest surprise of the report! There was another sharp increase in China's wheat usage for feed -- up another 5 mmt to a record-large 40 mmt (1.47 bb). That led to a 5 mmt decline in China's wheat stocks to 145.43 mmt, which is believed to be the first decline in eight years. China has sold more than 26 mmt of wheat internally from their reserves since January. That is perhaps a good sign for U.S. wheat, as China looks to replenish supplies.
Other notable changes were increases in wheat exports for both Russia, to 39.5 mmt, and the EU, to 27.5 mmt. This all caused world ending stocks of wheat to fall by 5.70 mmt to a much lower than expected 295.52 mmt (10.86 bb).
Wheat futures, up sharply on the expanding drought in the Northern Plains and Canadian Prairies, ended up closing strongly on the heels of the bullish world numbers.
Dana Mantini can be reached at firstname.lastname@example.org
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