In their December World Agriculture Supply and Demand Estimates (WASDE) report, USDA didn’t change much. U.S. corn and wheat ending stocks were bumped up slightly, soybeans left unchanged. U.S. corn and soybean exports did not change, and global stocks to use rations barely moved. Analysts had to look between the lines to see any impact from the trade war with China.
USDA pegged U.S. corn ending stocks at 1.781 billion bu., compared to the average trade guess of 1.738 billion bu. That’s up just slightly from USDA’s November number of 1.736 billion bu. Corn and soybean exports remain at 2.45 billion bu. and 1.9 billion bu., respectively.
There was one surprise in the report: USDA's increase to 2018/19 world soybean ending stocks at 115.33 million metric tons (mmt). According to Paul Gregory CEO of Allendale, Inc., the average trade guess was 112.79 mmt.
The larger than expected increase is the result from a 3 mmt cut to exports in Argentina, says Karen Braun, global agriculture columnist for Reuters. “Brazil's crop and exports came up, and the 17/18 crop was revised to 120.3 mmt. Old crop c/o up over 100 mmt. China, USA unchanged,” she tweeted.
While some analysts expected indications of trade tensions with China in this report, Angie Setzer of Citizens Grain LLC, says she was surprised to see USDA leave global numbers relatively flat.
“USDA did absolutely nothing when it comes to supply, demand or carryout,” she says. “They made slightly adjustments elsewhere in world numbers, but nothing earth shattering.”
Setzer did find it interesting that USDA came higher than CONAB for both corn and bean production out of Brazil.
Brazil’s soybean production is projected up 1.5 mmt to 122.0 mmt, reflecting higher yields in the Center-West region where crops have benefitted from favorable weather conditions. CONAB pegged Brazilian soybean production at 120.07 mmt.
In other world markets, Argentina’s exports dropped 3 mmt from November. USDA says Argentina lost those sales due to stiff competition with Brazil. As long as China keeps its tariff on U.S. beans, Argentina will struggle to compete for everyone else's business due to low price U.S. beans, they say.
According to Braun, China is a key buyer of Argentinian soybean, accounting for 90% of annual trade.
“So with stiff U.S. competition for business from other markets, Argentina remains dependent of China for most sales,” she tweeted.
While some analysts expected indications China would soon deliver on promises of buying U.S. soybeans, Setzer says she won’t believe the rhetoric around soybean shipments to China until she sees soybeans on ships.
“At this point I think it's lip service until I see actual purchases inked and boats loaded,” she says. “Not trying to sound like Debbie Downer, but we've watched Brazilian port values fall off a buck in the last month. That doesn't tell me they're willing to give up this new found business without a fight.”