Market Analysis

This month’s USDA world crop and supply/demand reports had revisions, but these changes didn’t always prompt the anticipated market reaction as the US stock changes might have suggested. Instead of soybean prices declining in the final 2 hours of trade, they increased modestly by the close.

Conversely, corn, whose US ending stocks declined from their January level by 125 million bu, only had a very modest price advance. Wheat, interestingly, did act somewhat appropriately with its 20 million bu. US stock rise prompting a modest price retreat to match its reduced export outlook. Of note, changes and potential changes in S. American crops may have influenced the market’s post-report action.

In corn, the USDA did shave Argentina’s corn by 3 mmt to 39 mmt vs. trade ideas of a 1-2 mmt change because of recent heat & dryness. However, the World Board didn’t adjust Brazil’s corn crop forecast of 95 mmt vs. the trade’s 93.5 mmt ideas from a reduced 2nd crop Safrina corn plantings for 2018. Interestingly, Brazil’s Ag Ministry (Conab) did slash 670,000 hectares from its Mato Grasso 2nd crop area, which dropped its corn size from 92.34 mmt to 88 mmt in their AM release ahead of the USDA.

Soybeans’ post-report reaction prompted the most head-scratching from us and others. Instead of waiting for S. American weather to better determine exportable supplies or possibly stair-step the US exports lower, the USDA dropped US foreign sales by 60 million to 2.1 billion, which increased 2017/18 stocks to 530 million bu. In S. America, Argentina’s crop was lower by 2 mmt to 54 mmt because of La Nina weather while the USDA upped its Brazilian bean forecast by 2 mmt to 112 mmt because of recent rains, However, the USDA’s world stocks tighten by 430,000 tons because of strong protein demand not reducing Argentina’s crush at the same rate as their crop size drop which likely helped support beans.

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