USDA Reports Review

USDA continued to take a more optimistic view of Brazilian crop potential than other crop scouts and agencies in its March World Agricultural Supply and Demand Estimates (WASDE) report released Friday. There were few significant changes in estimates, with U.S. corn and soy balance sheets unchanged from February.

Traders seemed to put little credence in USDA's Brazil soy estimate, and bullish changes to China demand sent soybeans higher. Wheat recovered to rally despite more Chinese soft red cancellations.

Let's look at some of the changes in both U.S. and world numbers in USDA's latest WASDE report, starting with corn.

CORN

USDA left the U.S. corn balance sheet unchanged from February. There was some thought that USDA might reflect a rise in corn exports or corn usage for ethanol based on the recent trend of both. However, that did not occur, and U.S. ending stocks remained at a comfortable -- if not burdensome -- 2.172-billion-bushel (bb) carryout. Traders had been looking for a modest reduction of 29 million bushels (mb), according to a Dow Jones survey.

On the world front, there were several small changes to report, but the net impact was a slightly lower world ending stocks number of 319.6 million metric tons (mmt) (12.58 bb) compared to the expectation for 320.7 mmt.

There were only minor changes to South America, which should have been a surprise to traders, with Brazil's corn production left unchanged at 124 mmt (4.88 bb). That is a full 10 mmt (394 mb) higher than Brazil's own crop agency, CONAB, is touting. Other crop scouts are even more pessimistic about the crop. Other notable production changes were Mexico, down 1 mmt, with Russia, South Africa and Ukraine down a combined 2.7 mmt. Argentine corn production was raised by 1 mmt to 56 mmt (2.2 bb). On the demand side, EU imports were dropped 1 mmt to 57 mmt (2.24 bb), while Mexico imports rose 1 mmt to 20.6 mmt (811 mb). Offsetting this was EU feed use lowered 1 mmt and Brazil feed raised a like amount, with Mexico feed use down slightly. Argentine and Ukraine corn exports were increased by 1 mmt and 1.5 mmt, respectively.

Overall, the corn report could only be deemed neutral, and the market seemed to reflect that, trading around unchanged for much of the day before finishing 1 3/4 cents higher.

SOYBEANS

As in corn, USDA chose not to touch the soy balance sheet despite U.S. export sales down 19% from a year ago. The carryout remained at 315 mb.

In the world, perhaps the most-watched number was the Brazil soybean production estimate with the traders surveyed by Dow Jones looking for a drop of 3.5 mmt; USDA only took 1 mmt off of their estimate to 155 mmt (5.69 bb). That is still more than 11 mmt (404 mb) higher than Brazil crop agency CONAB is projecting. Argentine production was left unchanged at 50 mmt (1.84 bb), close to expectations. Crush and import revisions for China in the years from 2020-21 to 2022-23 resulted in lower beginning stocks in the world to the tune of 1.4 mmt. USDA also revised China soybean imports higher by 3.65 mmt to 104.5 mmt (3.84 bb) for 2022-23, while increasing China soy imports in 2023-24 to a record 105 mmt (3.86 bb).

Other changes were South Africa's soy production, down 400,000 mt. Crush in Brazil and South Africa were lowered slightly, and exports by Brazil and Ukraine were raised. Brazil exports were increased by 3 mmt to 102 mmt (3.75 bb). As mentioned, China imports were increased by 3 mmt to a record-large 105 mmt for 2023-24. The net effect of all these changes was a world ending stocks number of 114.3 mmt (4.2 bb) -- down 1.7 mmt from February, but close to traders' expectations.

Soybeans were trading lower early Friday and post-report but were able to muster a nice rally late in the day, with a solid close above the 20-day moving average. It is likely bullish changes to China soy imports and disbelief in USDA's lofty 155 mmt production estimate for Brazil led to fund short-covering late.

WHEAT

No changes were expected on the wheat balance sheet, and yet it was the commodity with the only change in the U.S. supply and demand table. USDA dropped U.S. wheat exports by 15 mb, resulting in a bit higher ending stocks number (673 mb) than traders had expected. There were no other domestic changes, so the report was just mildly bearish.

With respect to world wheat, there were several minor changes, but in the end, world ending stocks of 258.8 mmt (9.5 bb) was just 600,000 mt lower than in February and close to expectations.

On the production side, Australian and Russian production were raised by 500,000 mt to 26 mmt (955 mb) and 91.5 mmt to (3.36 bb), respectively, with Argentine production up 400,000 mt to 15.9 mmt (584 mb). EU's production dropped 350,000 mt to 133.65 mmt (4.9 bb). EU and China imports were reduced by 1 mmt each to 13 mmt (477 mb) and 11 mmt (404 mb), respectively. EU feed use fell by 1 mmt and Ukraine by 300,000 mt. Australian and Ukraine wheat exports were increased by 500,000 mt to 20 mmt (735 mb) and 1 mmt to 16 mmt (588 mb), respectively.

While the wheat report was slightly bearish to mostly neutral, perhaps the big story of the day was the ability of Chicago May wheat to overcome not only higher ending stocks, but the second cancellation this week of soft red purchases by China to finish strong.

ADDITIONAL THOUGHTS

With few changes in U.S. balance sheets expected, which proved to be true, traders will be trying to assess if USDA is wiser than its counterparts and other crop scouts with respect to Brazil corn and soy production. They continue to predict corn and soy crops that are a combined 20 mmt more than Brazil's own crop agency, CONAB. Only time will tell who is closer to being correct.

The focus of traders will again turn to Brazil's weather over the next five to six weeks. Brazil soy harvest should approach 60% done by next week, giving us a better idea of production, while Brazil's safrinha corn crop still has plenty of weather challenges ahead. The revision in past and current China soy imports likely coaxed fund managers to cover some shorts on Friday.

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

Follow Dana Mantini on Twitter @mantini_r

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