Wheat prices at the three U.S. futures markets moved higher after the U.S. Department of Agriculture, in its February “World Agricultural Supply & Demand Estimates” (WASDE) report, made a larger-than-expected reduction in end-of-the-year stocks due to an increase in exports.
USDA increased wheat exports by 50 million bu. to 1.025 billion bu. and lowered ending stocks a similar amount to 1.139 billion bu.
Corn futures briefly moved higher after USDA increased the amount of grain it expects to be used for ethanol and food production this year. Those increases, in turn, led to a small reduction in ending stocks. Soybean futures moved lower after USDA left key numbers unchanged, contrary to trade forecasts for a small reduction in ending stocks.
“The biggest surprises today came in wheat. Lower world and U.S. ending stocks triggered some short covering by funds that still have on a big bearish bet in soft red winter wheat futures,” said Bryce Knorr, Farm Futures senior grain analyst. “The bigger question may be whether this is just rearranging the deck chairs on the Titanic, because there’s no indication burdensome world supplies are going away anytime soon.”
While the changes may be premature, Knorr said export business for wheat has increased, plus there are concerns about subzero weather hurting winter wheat in the Black Sea region.
USDA raised its estimate for U.S. domestic corn use for food and ethanol production this year, bringing end-of-the-year stocks to 2.32 billion bu., which is down from its January estimate and under the average trade forecast.
“If ethanol exports hold up, further cuts may be ahead,” Knorr said of the ending stocks. “An increase in exports is not out of the question, depending on how the South American crop turns out.”
U.S. soybean ending stocks were unchanged at 420 million bu. That was contrary to an average trade forecast for a small reduction. Exports remained at 2.05 billion bu.
USDA also left Argentina’s corn crop estimate unchanged at 36.5 million metric tons, while soybeans there were lowered less than expected to 55.5 mmt from January’s figure of 57 mmt. The trade, on average, expected about 36 mmt for the corn estimate and 54 mmt for the soybeans.
USDA left Brazil’s corn and soybean production unchanged at 86.5 mmt and 104 mmt, respectively, contrary to forecasts for a slight increase in both crops.
“USDA made a modest reduction to soybean production in Argentine due to floods, but not as much as I anticipated,” Knorr said. “The bigger surprise was no change in Brazil. That’s what I penciled in, but local estimates there increased in the last few days.”
Argentina and Brazil are harvesting corn now. Traders will be looking at Brazil’s weather into spring, when its second crop will be developing. That harvest will be in May and June.