Brazil Cuts Soybean Crop Estimate

March 7, 2013 12:30 AM

What Traders are Talking About:

* Brazil cuts soybean crop estimate. Conab, the supply agency of the Brazilian government, cut its soybean crop forecast to 82.1 MMT from 83.4 MMT at the beginning of February. Conab cited too little moisture in southern Brazil and too much rain in Mato Grosso. Pro Farmer South American consultant Dr. Michael Cordonnier, who is currently in Brazil, says while the Mato Grosso crop didn't live up to expectations, southern Brazil got timely rains during pod fill and yields will be strong. He currently estimates the Brazilian soybean crop at 82 MMT.

The long and short of it: Most private estimates for Brazilian soybean production are around 82 MMT, though there's a range from 80 MMT to 84 MMT. The cut by the Brazilian government signals the finish to the growing season wasn't ideal, but the country is still expected to grow a record crop. The bigger issue now is how to get the crop from fields to ports and onto ships.

* POET trying to buy wheat for ethanol production. The tight corn supply situation has been known for months, but the market got another reminder yesterday when reports surfaced that POET was trying to source SRW wheat for ethanol production in Indiana. With old-crop wheat priced under old-crop corn, and more readily available, using wheat to keep ethanol facilities running is logical. A POET official told Reuters, "Most POET plants have the ability to process additional feedstocks such as wheat or sorghum along with corn, and they will do so if it makes sense in the local markets. Being able to use multiple feedstocks can help manage costs and balance those markets." It's believed most plants could blend 10% to 20% wheat with corn without having to make major modifications.

The long and short of it: With old-crop wheat trading at a discount to old-crop corn, don't be surprised to hear more talk of increased wheat use. The market is telling end-users wheat is a "value" buy, especially with corn supplies tight -- and what corn that's out there isn't for sale at current prices.

* Argentina authorizes wheat for exports; India expected to free up more wheat for export. Argentina has authorized 5 MMT of wheat exports for 2013-14, according to a Reuters report citing an unnamed government official and a trade source. This authorization comes much earlier than in the past, giving producers a better opportunity to plan before planting the 2013-14 crop. It also signals the Argentine government is confident the 2013-14 crop will be larger than the 2012-13 crop, as exports for the current marketing year now stand at 3 MMT after reportedly being boosted by 1 MMT yesterday. Meanwhile, an Indian ministerial panel is meeting later today to discuss freeing up an additional 5 MMT of wheat for export as the country looks to clean out older government stocks prior to the new-crop harvest.

The long and short of it: What the wheat market needs to stop the bleeding is fresh demand news. Unfortunately, there is still plenty of competition despite a virtual halt of wheat exports from the Black Sea region. Plus, a firming dollar has offset much of the recent sharp price decline.



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