Friday night our time, the USDA released their latest supply and demand estimates. With the exception of soybeans only modest changes were made to the report. Increased Chinese wheat demand (+2.5mmt to 116mmt) and South American soybean production (-6.4mmt to 120mmt) were the key points with soybean forecasts seeing the largest adjustments. Global ending stocks were reported above trade estimates for corn and lower than expected for wheat and soybeans.
Actually the cuts to South American soybean production prompted the USDA to forecast the largest year on year decline on record for global production (-11.5mmt to 57.3mmt). While corn output was revised higher thanks to an unexpected 1mmt increase in Brazilian output (on more acreage on second safrinha crop) and leaving Argi unchanged at 22mmt. US ending stocks were left unchanged when a reduction was expected, while ethanol usage was left unchanged at 127mmt.
World wheat ending stocks were revised 3.5mmt lower from the previous record high (213.53mmt) last month. However levels are still at burdensome levels and 10mmt higher then twelve months ago. Aussie wheat exports were revised 500kt higher at 21.5mmt, along with US (+700kt @ 27.2mmt) and Kazakh (+500kt @ 9mmt). While India’s exports were surprisingly left unchanged at 700kt, with the USDA forecasting a record 83mmt wheat crop.
Although there were larger then expected cuts to soybean production as detailed above, bears were targeting US ending stocks remaining unchanged (7.5mmt) and reduced Chinese (-500kt @ 55mt), EU (-400kt @ 11.3mmt) and Brazilian (-1mmt @ 36mmt) usage. Nonetheless world-ending stocks were lower than the trade expected and is now 11.5mmt lower then a year ago. These tightening old crop supplies for soybeans is behind the 144c rally since Feb, whilst Winnipeg canola has also gained +$74 over the same period.
Apart from the USDA report, it was a fairly quite week, US origin picked up Egyptian GASC business for the third time in a row. With winning tender price remaining unchanged to that of three weeks ago. There was no Aussie ASW offers, which comes as no surprise given logistics (both at port and road/rail) is so tight. The lack of Russian offers shouldn’t come as a surprise either due to their own tight logistics. However, there is news that Russki new crop wheat is being quoted at $225 FOB, $30 below current market prices.
There has still been no confirmation of the rumored Chinese buying of US corn that dragged the market higher on Friday despite a bearish slant to the USDA numbers. Even with the lack of confirmation, fund and spec buying emerged to support the strong gains. Apparently domestic mills in China are forking out close to $400/t for domestic corn compared to $325 landed US origin. Last years imports of 4mmt, may just be the tipping point. With doubts cast over 11 years of continuous increased production, where production has increased a staggering 85mmt to 191mmt
Weather wise Argentina continues to keep getting lashed with wet weather, with at least a further 50mm of blanket coverage over the weekend in southern state of Buenos Aires. Late planted soybeans and winter wheat will get a boost from this. In North America warm weather is expected across much of US plains in the next two weeks will help prepare the soils for earlier than normal plantings for the spring wheat crop. Temperatures of 20˚C support aggressive crop development early in the growing season, however a late cold snap for winter wheat crops will severely damage yield potential.
The next major report the will be hanging out for is the March 31 US acreage report, this has and will continue to provided extreme price volatility. Domestically old crop prices continue to shrug off international futures (which have gained $10/t over the last two days) and continue to trade in a tight pattern. But with shipping slots getting scarce it looks likely that basis will continue to erode in value. Last week East Coast APW averaged -$25, compared to -$11 in Nov/Dec. While new crop APW compared to Dec’12 futures is currently at -$21/t.