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WASDE Reactions: Bulls Shrug Off Ethanol, Soybean Export Demand Bumps

The numbers were fundamentally friendly, at least on paper. The markets didn't see them that way, though.

Soybean ending stocks are well off from the average trade estimate, but they fell within the full range of prior guesses sending soybean futures moving higher shortly after USDA released its monthly World Agricultural Supply and Demand report Tuesday morning. Meanwhile, corn stocks are lower, with use for ethanol increasing and a slight dip in feed use domestically.

"U.S. soybean supplies are increased 10 million bushels to 4,086 million on higher projected imports. Soybean exports for 2014/15 are projected at 1,790 million bushels, up 20 million reflecting the record pace of shipments through January. Soybean crush is raised 15 million bushels to 1,795 million on increased domestic soybean meal disappearance, which is raised in line with projected gains in meat production. Soybean oil production gains from additional crush are mostly offset with a lower extraction rate. With increased production and reduced exports, soybean oil ending stocks are projected at 1.505 billion pounds, up 75 million," according to Tuesday's WASDE report. "Soybean ending stocks are projected at 385 million bushels, down 25 million from last month."

Even though exports were raised for soybeans Tuesday, it didn't knock the number out of the range of previous trade estimates, says Kluis Commodities market analyst Cory Bratland.

"I'm a little disappointed in this soybean reaction, to be honest," he said Tuesday. "They took soybean exports up a little bit."

For corn, the 75 million-bushel increase for projected ethanol use based on higher overall fuel demand expectations moving into spring also didn't move the corn ending stocks number out of the previous trade range either; the bottom end of previous estimates was 1.817 billion bushels and USDA's number came in Tuesday at 1.827 billion.

Soybean exports and corn for ethanol use were the "big numbers" on the domestic side, Bratland says. But neither deviated from trend enough to cause much of a stir in the trade, adds U.S. Commodities market analyst and grain broker Jason Roose.

"I think traders were anticipating no big changes. The government did lower the carryout just a little bit, so I think their revisions were no big surprises. They lowered the numbers, but not enough to change the big picture. The big picture is still saying 1.827 billion bushels is still a big carryout," Roose says, adding the same is true about the 385 million-bushel carryout number for soybeans. "Even though it's not a 410 or 395, the soybean number is still a big carryout. I've got customers texting me as I speak who are saying it's a yawner."

Don't hold out for a guaranteed snoozer all-around just yet, cautions Al Kluis, broker and analyst with Kluis Commodities. Long a proponent of watching how the trading day ends vs. how it immediately responds on big USDA report days, Kluis said Tuesday the data remains inherently bullish -- at least for soybeans -- even though the trade didn't react in lockstep fundamentally.

"Take a deep breath and watch how things are trading. You never want to do anything within the first five minutes," Kluis says. "The U.S. numbers -- longer term -- are positive for the soybean market."

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