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WASDE lifts corn, wheat prices
In its monthly World Agricultural Supply & Demand Estimates (WASDE) report, USDA raised corn ending stocks, reflecting lighter usage, both domestically and abroad.
At the same time, the agency lowered soybean and wheat ending stocks for the U.S. but slightly raised corn and soybean output projections for South America, and those alone were mainly behind bullish initial reactions to the report in the corn and wheat markets.
The result: A market reaction contrary to what traders and analysts expected heading into Friday's WASDE data.
Market reaction: Data drops soybean market
Corn exports have been "really whacked" in recent weeks, and that's reflected in Friday's report that shows 50 million fewer bushels were sold abroad, with much of the dip coming because of growing competition from Brazil. So, though the U.S. stocks number is higher, it's not an indication of a complete pullback in corn demand, analysts say.
"We went into this report oversold on corn and overbought on beans, and we kind of reaped some value on corn and resistance on beans because of a large South American crop," says Don Roose, broker and analyst with U.S. Commodities in West Des Moines, Iowa. "We haven't throttled back domestic feed us on corn, and we're trying to use more wheat."
Friday's report likely won't have a lot of legs, time-wise, in its influence on grain prices moving forward, largely because of the intense focus on crop weather in South America, namely the too-wet parts of Brazil and the too-dry parts of Argentina, both of which are causing considerable crop stress (though the latter's been eased a bit by rainfall this week).
"We are waiting for rain," says Mauricio Torres, a crop advisor in Chacabuco, Argentina. Friday afternoon, temperatures were surging into the 90s and humidity was low, Torres says.
Moving further ahead as South American farmers race toward corn and soybean harvest, early crop progress in North America will soon start to creep into traders' minds in Chicago, says Sal Gilbertie, analyst and broker with Teucrium Trading LLC.
"The markets will be watching South American production and exports very closely for the remainder of the crop year. Once again, the importance of a large, early North American harvest for both corn and soybeans will loom large in traders’ minds as they look to see if farmers can replenish historically low stock levels in both soybeans and corn and alleviate severe late-summer price rationing in old crop supplies," Gilbertie says. "Wheat markets remain balanced, even as demand in the U.S. increases slightly resulting in slightly lower ending inventories for this crop year."