USDA Report Day April 11, 2023

Market Movers: USDA Report Day 

The April supply/demand covers old crop demand revisions for the US balance sheet. The starting point for USDA’s changes is the recent March 31 Grain Stocks report. This covered remaining old crop as of March 1. That represents stocks after six months of usage for corn and soybeans and nine months for wheat. South American production changes are monitored as a secondary issue. The first official new crop balance sheet will be shown on the May 12 supply/demand report.

Corn:

2022/23: Old crop US corn ending stocks were left unchanged from last month at 1.342 billion bushels. The trade expectation was 1.319 (ALDL 1.342). Given that USDA counted 69 million bushels less old crop than expected on the quarterly Grain Stocks report the trade expected an increase in feed/residual and therefore a lowered stock estimate. There was no change for corn for ethanol on this report. Aside from the surprise for feed/residual the next category of note was exports where USDA left their March estimates unchanged. Allendale has light concern over exports. To meet USDA’s new export estimate, remaining sales need to average +9% vs. the five year average pace from here through August. This will be in question for two reasons. The weeks before China’s buying were running -11% from the five year average. If we return back to that pace through August we’ll miss USDA’s goal by 60 million. The second issue is that Brazil’s current export bid is $29 per tonne lower than the US Gulf. That will likely continue to widen going into the June/July Brazilian harvest. USDA’s unchanged stock was made with a decline from their import estimate by 10 million. That was offset with a lowered estimate for other industrial by 10. The current 1.342 billion stock estimate would imply old crop futures at 620 – 630 for price.

World corn stocks were lowered from 296.5 million tonnes to 295.4. USDA now has a reasonable estimate for Argentina’s crop. It was lowered by 3 million tonnes to now 37.0. They are now in the private trade expectation range. They similarly lowered exports by 3. Brazil’s corn crop was left unchanged at 125.0. Ukraine’s completed fall 2022 harvest was left unchanged. Their export estimate was raised by 2 to now 25.5.

Soybeans:

2022/23: Old crop US soybean ending stocks were also left unchanged on this report, 210 million bushels. The trade estimate was 198 (ALDL 215). The trade’s belief of lower stocks was made as the March 31 Grain Stocks report counted 57 million less bushels than the trade estimate. There were no changes for exports, domestic crush or the small feed/residual category. Officially we are a little behind on crush. First half of the year ran -0.8% from one year ago. To hit USDA’s current goal the second half needs to run +2.3%. Given the trade’s expectation for a pickup in later months we are okay with their current estimate for now. The area that we still suggest needs to be addressed is exports. The most recent nine weeks of US export sales have been terrible at -62% from the five year average pace. This poor sales pace was made in the heart of the concern over Argentina’s production. The bigger issue from the trade’s standpoint would be Brazil’s crop. With harvest 82% complete Brazil’s pricing discount has widened to an astounding $95 per tonne, $2.59 per bushel. If remaining sales through August hold no change at -62% from average, unrealistic, we’ll miss USDA’s goal by a large 146 million bushels. If they improve to -20% through August the miss will run 65 million. The trade still holds an expectation for lowered stocks in the months ahead and therefore prices will likely remain over economic value of 1380 in the short term.

USDA lowered world soybean stocks from 100.0 million tonnes to 100.3. Argentina’s crop was lowered by 5 million tonnes to now 27.0. Though it was a larger cut than expected it does bring USDA down to the private trade’s general discussion. Brazil’s crop was raised by 1 million tonne to 154.0 Though USDA lowered their estimate of China’s crush by 1 million tonne on this report they left the import estimate, the trade’s focus, unchanged.

Wheat:

2022/23: Old crop US wheat ending stocks were raised on this report from 568 million bushels to 598. The trade estimate was 574 (ALDL 592). Where corn and soybeans still have plenty of time for USDA to get the numbers right, with an August 31 marketing year-end, the wheat year ends on May 31. You may remember that USDA counted 12 million bushels more US wheat as of March 1 than the private trade estimate. USDA reacted lowering feed/residual by 25. They also raised the import estimate by 5. Allendale still has concern with wheat exports. At this later portion of the marketing year our focus turns to shipments rather than new sales. The most recent four weeks ran -32% from the five year average. If that holds through May the general miss vs. USDA’s whole-year estimate would run 28 million bushels. Our similar year pricing study originally suggested a spring downside to 686 for the July Chicago. The current low is just under that at 665. If this holds the next move would be a rebound into summer harvest to 752. Given that current US wheat pricing is heavily determined by world trade flows, and not the US balance sheet, we would rather focus on KC/Chicago or Minneapolis/Chicago spreads.

World wheat ending stocks were lowered from 267.2 million tonnes to 265.1. Production changes for individual countries were relatively minor. Exports were lowered by 2 mt for EU but raised by 1.5 for Russia.