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USDA Lowers Corn Stocks, Prices Rise

U.S. soybean, wheat stocks build.

DES MOINES, Iowa -- The U.S. soybean and wheat ending stocks are getting bigger, while the corn stocks tighten, according to the USDA.

As a result, corn market reacted positively, while soybeans and wheat markets dropped following the release of the data. However, the soybean market has reversed.

At the close, the March corn futures finished 1/2¢ higher at $3.65 3/4. May futures finished 1/2¢ higher at $3.73 1/4.

March soybean futures settled 4 3/4¢ higher at $9.87 3/4.  May soybean futures finished 4 1/2¢ higher at $9.98 3/4.

March wheat futures finished 4 1/4¢ lower at $4.56 1/4.

March soy meal futures ended $6.30 per short ton higher at $341.70. January soy oil futures finished 0.35 lower at 32.21¢ per pound. 

In the outside markets, the NYMEX crude oil market is $0.75 lower, the U.S. dollar is lower, and the Dow Jones Industrials are 584 points lower.

In its February Supply/Demand Report Thursday, the USDA pegged the U.S. 2017/18 corn ending stocks at 2.352 billion bushels vs. the average estimate of 2.45 billion bushels and the government’s previous estimate of 2.47 billion.

For soybeans, the USDA set the U.S. 2017/18 ending stocks at  530 million bushels vs. the average trade estimate of 496 million bushels and the USDA’s January estimate of 470 million bushels.

The U.S. 2017/18 wheat ending stocks were pegged at 1.009 billion bushels vs. the average trade estimate of 989 million bushels and the USDA’s previous estimate of 989 million.

usda-ending-stocks-february-2018

World Crop Production

In its report, the USDA pegged the 2017/18 Brazilian corn production at 95.0 million metric tons compared with the average trade estimate of 92.7 million metric tons and the USDA’s January estimate of 95.0 million mt.

For Brazil’s soybean production, the USDA sees 2017/18 output at 112.0 mmt. vs. the average trade estimate of 111.6 million metric tons and the USDA’s previous estimate of 110.0 mmt.

USDA pegged Argentina’s 2017/18 corn production at 39.0 million metric tons vs. the average trade estimate of 40.4 mmt and the USDA’s January estimate of 42.0 mmt.

For Argentina’s 2017/18 soybean output, the USDA sees it coming in at 54.0 mmt. vs. the average trade estimate of 53.6 mmt. and the USDA’s previous estimate of 56.0 mmt.

world-production-february

Trade Response

Sal Gilberti, Teucrium Trading owner, says that today’s WASDE report confirmed the trend of demand for grains beginning to draw down on supplies, but supplies remain enormous by historical standards.

“Still, this seems to be muting the price response to global stock drawdowns. Today’s surprise price action looked to be in soybeans, where markets reacted bearishly on the initial report but then rallied to new highs post report,” Gilberti says.

Gilberti adds, “The U.S. soybean surplus cannot seem to overcome global demand patterns and the projected reduction on global oilseed stock levels, which resulted in soybean prices trading well off their lows later in the session.”

Peter J. Meyer, Senior Director PIRA Agriculture, says that there are two notes of interest, regarding today's USDA data.
“In soybeans, the USDA continues to play a zero sum game by offsetting inner-country production losses in South America while shifting export demand from the U.S. to Brazil," Meyer says. 

A U.S. carryout above 500 million bushels should have surprised no one, given the pace of exports, Meyer says. 

"Leaving the global balance sheet virtually unchanged at roughly 98 million metric tons may be misguided at the exact time that U.S. farmers are making planting decisions.  An increase in Brazilian production of 2 million metric tons is a step in the right direction, but let’s remember that last year the Brazilian crop gained 12 mmt. between February and final estimate, and this year 3.3% more acreage was planted with very little stress during the growing season," Meyer says.
 
Meyer adds, “The only item of note in corn would be the 95mmt. Brazilian production estimate after CONAB (Brazil's government agency) announced this morning that they expect an 88 mmt crop.  We are of the opinion the global corn balance sheet can get below 200 mmt. this year against the 203 mmt. in today’s report. And, a lot of that will be related to a smaller Brazilian crop which we currently estimate at 90.25 mmt.”

Mike North, Commodity Risk Management Group, says the big story is the USDA's soybean ending stocks number.

"The central themes are that soybean exports  which have lagged the normal pace to hit projections were adjusted accordingly.  Corn exports increased to accommodate shrinking Argentina production," North says.

Brian A. Rydlund, CHS Hedging Market Analyst, says that the USDA report was harsh on soybeans.

“U.S. carryout goes up from 470 million bushels to 530 million bushels, by cutting exports 60 million bushels, crush unchanged,” Rydlund says.  
 
He adds, “The U.S. corn carryout was cut by 125 million bushels because exports were raised by 125 million bushels, from 1.925 billion bushels to 2.050 billion. Corn for ethanol use was unchanged at 5.525 billion bushels, but that can go up in future reports. Corn for feed use was unchanged at 5.550 billion bushels. So, this report was dull beyond the export parts of both corn and soybeans.” 

With the USDA cutting U.S. wheat exports by 25 million bushels, pushing U.S. carryout over 1 billion bushels, that is weighing heavily on the market, Rydlund says.               
 
Regarding the world data, wheat carryout was cut by about 2 mmt., corn world carryout off almost 3 mmt, via production cuts mainly, Rydlund says.

“In today’s report, the world soybean carryout at 98.1 million metric tons was basically unchanged,” Rydlund says.

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