Ho-hum WASDE turns focus to planting intentions

Ho-hum WASDE turns focus to planting intentions

Despite global events, WASDE report fails to lend support to markets.

VARIOUS global influences pushed grain markets higher heading into the U.S. Department of Agriculture's March 10 "World Agricultural Supply & Demand Estimates" (WASDE) report, but with no large fluctuations in the projections, traders almost immediately began to look toward the March 31 "Prospective Plantings" report after crop prices were mostly down last week.

The 2013-14 U.S. soybean supply and use projections included higher imports and exports, a reduced crush and reduced ending stocks compared with last month's WASDE report.

USDA raised soybean exports by 20 million bu. to a record 1.53 billion, reflecting continued strong sales and shipments through February. The soybean crush was reduced 10 million bu. to 1.69 billion bu., reflecting weaker-than-expected domestic soybean meal use through the first quarter of the marketing year.

USDA projected soybean stocks of 145 million bu., down 5 million from last month (Table 1). Soybean oil stocks were reduced due to lower production and increased exports.

The USDA projections for world soybean ending stocks decreased from 73.00 million metric tons in February to 70.64 mmt (Table 2).

USDA reported that other changes for soybean oil included reduced use for biodiesel and an offsetting increase for food, feed and other industrial use.

Soybean and soybean product prices are all estimated to be higher in March. USDA raised its season-average price forecast for soybeans 25 cents on both ends of the range to $12.20-13.70/bu. and forecasted soybean oil prices at 36-39 cents/lb., up 1.5 cents at the midpoint. Soybean meal prices are projected to be $450-490 per ton, up $25 at the midpoint.

USDA projected Brazil's 2013-14 soybean production at 88.5 mmt, down 1.5 mmt (Table 3), mainly reflecting hot, dry weather in the south when much of the crop was in the flowering and filling stages. Argentina's soybean production projections remained unchanged from last month, at 54 mmt.

USDA reduced projected U.S. feed grain ending stocks for 2013-14, with higher corn exports and lower oat imports. Corn exports are projected to be 25 million bu. higher on stronger world imports and the rising pace of shipments in recent weeks. Continued strong export sales also supported the higher figure.

Projected U.S. 2013-14 corn ending stocks were lowered from 1.481 billion bu. in February to 1.456 million bu. in the March report, coming in lower than the average trade estimate of 1.619 billion bu. USDA projected world corn ending stocks to increase from 157.30 mmt in February to 158.47 mmt.

The season-average farm price for corn was narrowed 5 cents on both ends of the projected range to $4.25-4.75/bu.

USDA pegged 2013-14 global coarse grain supplies to increase by 1.4 million tons due to larger corn beginning stocks for Indonesia, higher corn production for China and higher barley production for Australia.

USDA projected corn production at 70 mmt for Brazil and 24 mmt for Argentina, both unchanged from the February report.

Arlan Suderman, senior market analyst for Water Street Solutions, said USDA was pretty much on target with its numbers. However, he said some would argue that Brazil's soybean production estimates should have been lowered.

He said the fact that USDA didn't lower the number despite all the evidence of a smaller crop perhaps means the agency believes that there could be a tremendous amount of double-crop soybeans. On the other hand, he suggested that USDA was trying to save some face since the February estimates were higher than expected.

With a bearish tone for the overall report, the trade put the March 10 WASDE behind it and focused instead on South America and the March 31 USDA plantings and stocks reports.

"Eyes will be focusing on the progress and size of the South American corn and soybean harvest, any cancellation or switching of U.S. soybeans from China, fund positioning, effects of weather on upcoming field work and planting and, finally, the March 31 'Prospective Plantings' and 'Quarterly Stocks' reports," said Tom Leffler with Farm Futures.

 

1. 2013-14 U.S. ending stocks, billion bu.

 

USDA

Avg.

Trade

USDA

 

March est.

est.

range

Feb. est.

Corn

1.456

1.619

1.574-1.748

1.481

Soybeans

0.145

0.143

0.125-0.164

0.150

Wheat

0.558

0.603

0.574-0.653

0.558

 

2. 2013-14 world ending stocks, mmt

 

USDA

Avg.

Trade

USDA

 

March est.

est.

range

Feb. est.

Corn

158.47

159.6

156.27-163.20

157.30

Soybeans

70.64

72.67

71.00-75.35

73.00

Wheat

183.81

184.97

182.80-187.00

183.70

 

3. 2013-14 South American production, mmt

 

USDA

Avg.

Trade

USDA

Argentina

March est.

est.

range

Feb. est.

Corn

24.00

23.82

19.80-25.00

24.00

Soybeans

54.00

54.13

52.70-57.00

54.00

Brazil

Corn

70.00

69.99

66.10-74.00

70.00

Soybeans

88.50

89.76

88.30-91.00

90.00

Source for Tables: U.S. Department of Agriculture.

 

Market recap

The markets had a delayed reaction to the March 10 WASDE report, but when the market did move, the numbers in the report caused profit-taking and outright selling, which sent prices lower.

Suderman said he believes the trade had unrealistic expectations and a bearish tone overall in regard to the WASDE report. However, he also pointed out that the market was overbought and due for a correction.

He said there was news last week that China was cancelling soybean shipments from Brazil. Crush margins are poor in China, but because it was still taking shipments from the U.S., Suderman said he doesn't believe the crush margins are the reason for the cancellations. He wondered why China wouldn't just instead make large cancellations of U.S. soybeans and suggested that, perhaps, China was finding quality issues with the Brazilian soybeans.

Nearby soybean prices opened at $14.1525/bu. last Monday morning, but prices plunged to as low as $14.1775/bu. during the day after the release of the March 10 WASDE. Prices settled at $14.1925 on Monday, but Tuesday and Wednesday brought even lower prices, and by last Thursday, nearby soybean prices were weaker at $13.9075/bu.

Prices were also lower in the corn markets following the announcement of the WASDE report. Prices last Monday opened at $4.79/bu., dipped to as low as $4.7025/bu. and closed at $4.72. Nearby corn prices were still somewhat lower at Tuesday's close, but by Wednesday and Thursday, corn prices were back up and closed at the same nearby prices of $4.8425/bu. on both days.

"It's getting tough for corn to sustain a rally," Suderman said. "It's getting tough to continue to justify in overbought conditions."

Traders remained concerned about the Ukraine last week and whether trade or crop planting would be affected by the ongoing situation. Despite reassurance that planting would not be affected, Suderman noted that the Ukraine's agriculture minister said last Tuesday that the Crimean Peninsula had only about 4% of ground planted and that farmers weren't able to get fuel to plant crops.

This announcement could mean a loss of 1.2 mmt of grain from that region. Suderman said most of the loss would be in wheat production, but other crops could be affected as well. The Crimean Peninsula doesn't contribute significantly to global production, but the story isn't written for Ukraine as a whole.

By last Wednesday, the Ukraine was reporting that Russia continued to build up troops along its eastern border, raising global concerns that the events could be more prolonged in that region. Suderman said the bigger question becomes whether overseas customers will be comfortable writing contracts with the Ukraine until the conflict is settled.

 

Ingredient watch

The U.S. Grains Council (USGC) recently reported that domestic logistical problems have been causing substantial price increases for rail-delivered dried distillers grains plus solubles (DDGS). Rail-delivered DDGS rates to California and the Pacific Northwest increased by $40/mt.

The logistical issues have proved to be painful for domestic and Mexican DDGS end users. One DDGS merchandiser to Mexico reported that his clients are also dealing with late shipments.

USGC reported that Southeast Asia imported just more than 1 mmt of DDGS from the U.S. last year, an increase from 2012.

In fact, USGC said the numbers for January are strong and tracking ahead of 2013 in a year-over-year comparison: 110,112 tons for 2014 versus 93,304 tons for 2013. One reason for this — other than Vietnam increasing its imports by more than 22,000 tons — is the addition of Myanmar (Burma) to the list of importing countries.

According to Adel Yusupov, USGC regional director for Southeast Asia, the market growth resulted from educational outreach in the area.

"We held seminars and one-on-one meetings to share information about DDGS use in animal nutrition, DDGS production, product qualities and trade," Yusupov said. "The result of these successful trips is that we're seeing exports of U.S. commodities pick up in markets such as Myanmar."

Volume:86 Issue:10

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish