Grains higher after the WASDE. U.S. numbers came in friendly for corn, neutral for wheat but bearish for soybeans. So is the market even trading the report or is it fund short covering? Matt Bennett, AgMarket.Net, unpacks the report and market reaction.
The U.S. corn balance sheet was friendly in the May WASDE. With a drop in acreage to 90 million, production was down nearly 500 million bushels. New crop ending stock were pegged at 2.1 billion bushels, up 80 million from this year but 182 million below trade estimates and market analysts says that was slightly bullish but so was the 100 million bushel drop in old crop corn carryover.
Bennett says, “That brought old crop stocks to just over 2 billion so that’s what you’re carrying in and so that put the new crop ending stocks at just a shade over 2.1. If you’d have said back in February, we’d have a 2.1 billion ending stocks you would have not had anyone believe you. Is this a bullish number maybe not, but it is at least a manageable number.”
USDA did drop Brazil and Argentina corn production by a combined 4 million metric tons but is still well above Conab.
Meanwhile USDA left South American soybean production nearly unchanged…again. And the domestic numbers in the WASDE were bearish for soybeans. With higher acreage and record yield and production.
He says, “Almost 3 million more bean acres planted this year and a 52 bushel yield you are looking at production well above last year at nearly 4.5 billion bushels.”
And although USDA raised crush and exports by 250 million bushels, the new crop ending stocks swelled by 105 million bushels from last year to 445 million.
On wheat, Bennett says the report was neutral with U.S. production slightly below estimates at 1.86 billion bushels, and ending stocks were above last year at 766 million.
Bennett says, “Its down from expectations but up from old crop stocks so you’ve got to think it’s not bullish.”
And global wheat production was up 10 million metric tons despite a lower Russian crop. However, with grains higher after the report that’s bullish and Bennett says the market was more focused on weather and fund short covering.
