USDA’s World Agricultural Supply and Demand Estimates (WASDE), released March 10, provided the trade with a few surprises. First, USDA raised corn exports and lowered 2013-14 corn ending stocks instead of raising supply as expected. Second projected soybean exports came in lower and ending stocks higher than expected. And finally except for a drop in Brazil’s soybean production, USDA left the South American crop production unchanged.
Traditionally there is not much interest in the March report, but given the recent pace of U.S. corn exports and unrest in Ukraine, the March report was more closely watched than it typically is, says Randy Martinson executive vice president with Progressive Ag in Fargo, N.D. Martinson was a commentator on an MGEX post-report press conference.
And USDA did not disappoint.
Corn Stocks Lowered
USDA raised projected corn exports by 25 million bushels due to the stronger pace of shipments in recent weeks. Projected ending stocks of corn were lowered by an offsetting 25 million bushels. Analysts were expecting USDA to raise corn ending stocks by 7 million bushels to 1.456 billion bushels.
"We have slowly been chewing away at old-crop corn stocks, which should be friendly to corn," says Martinson. With South America’s corn production and world ending stocks both higher than expected, though, Martinson says the report will most likely be neutral for corn.
The department narrowed its projected season-average farm price for corn by 5 cents on both ends of the projected range to $4.25 to $4.75 per bushel.
Soybean Exports Not as Strong as Expected
USDA raised its estimate for U.S. soybean exports, which reduced ending stocks compared with last month’s WASDE report. However, the department raised exports by only 20 million bushels to a record-high 1.53 billion bushels.
"Our current export pace on soybeans is 1.6 billion bushels," says Martinson. "Either there will be some big cancellations in coming months, or USDA will slowly have to increase its forecast for soybean exports."
The estimated soybean crush was reduced 10 million bushels to 1.69 billion, reflecting weaker-than-expected soybean meal use.
Ending stocks of soybean for the 2013-14 crop are estimated at 145 million bushels, down 5 million from last month’s estimate but 4 million bushels higher than the average trades estimate.
USDA raised its projected soybean price by 25 cents to a season-average farm price of $12.20 to $13.70 per bushel. The department also raised its soybean meal price to a projected $450 to $490 per ton, up $25 at the midpoint.
Larger Corn and Bean Crops in South America
Estimated production for corn and soybeans in South America was higher than expected. For Brazil, USDA expects 70 million metric tons of corn and 88.14 million metric tons of soybeans, which were higher than average trade estimates 69.03 metric tons of corn and 88.14 metric tons of beans.
Estimates for Argentina were also higher than the trade expected at 24 million metric tons for corn, compared with the average trade estimate of 23.25 million metric tons, and 54 million metric tons for soybeans, compared with a trade estimate of 53.5 million metric tons. Argentine production, however, was lower than last month’s estimates.
The South American production numbers are a little bit bearish for prices, Martinson notes.
World corn stocks were larger than expected at 158.5 million metric tons, while ending stocks of soybeans were smaller than expected at 70.6 million metric tons.
No Changes to Wheat
There were no changes to the 2013-14 U.S. all-wheat supply and demand numbers. A 15-million-bushel increase in projected hard red spring wheat exports was offset by a decrease in exports for soft red winter wheat.
"Ending stocks of wheat at 558 million bushels should be a little bit friendly because they were 10 million bushels less than the trade expected," notes Martinson.
Despite stable supply and demand numbers, USDA raised the projected season-average price for all wheat by 10 cents on the bottom end of the range to $6.75 to $6.95 per bushel.
Projected world ending stocks were raised slightly to 183.8 million metric tons.
"USDA made no changes to wheat in Russia or Ukraine for either old crop or new crop," he adds.