Buenos Aires Grain Exchange Archives | Grain Brokers Australia

USDA welcomes the New Year with very little fanfare…

Posted by | USDA WASDE Report, Weekly Commentary | No Comments

Released late last week, the January World Agricultural Supply and Demand Estimates (WASDE) report tends to be quite significant, given that it’s usually the final numbers in terms of yields, harvested area and production for the crop year in the United States (US). 

However, the case is not closed on 2019 US production just yet as the United States Department of Agriculture (USDA) acknowledged it would resurvey producers in Michigan, Minnesota, North Dakota, South Dakota and Wisconsin for corn production and Michigan, North Dakota and Wisconsin when it comes to soybean production.

Heading into last Friday’s release, much of the market chatter suggested that the report would be bullish, based on the expectation of lower summer crop yields. But the opposite happened with the USDA raising the national yield for both corn and soybeans.

US corn production was forecast at 347.7 million metric tonne (MMT) with an average national yield of 10.55 metric tonne per hectare (mt/ha), slightly higher than last month’s yield estimate of 10.48mt/ha.

Globally, corn production in South America was left unchanged by the USDA with Brazil and Argentina forecast to produce 101MMT and 50MMT respectively. These numbers seem to belie the dry conditions being experienced in many parts of Brazil and Argentina this summer.

The only production increase amongst the major exporters was Russia which the USDA increased by 0.5MMT to 14.5MMT. The washup of all the changes was an increase in global output by a little more than 2 MMT to 850MMT excluding China, and 1,111MMT including China.

However, the bullish part of the corn equation comes in the demand number, increased by more than 6MMT globally compared to the December report. The US accounted for just under 6MMT with a 1MMT increase in China countered by a 0.5MMT decrease in Ukraine and several other minor downward revisions.

The USDA pegged final 2019 US soybean production 90.4MMT, on an average yield of 3.19mt/ha compared to 90.2MMT and an average yield of 3.15mt/ha in the December report. This was a surprise to most analysts who expected to see the impact of the extremely challenging season continue to ripple through the country’s soybean supplies. Nonetheless, this is still 20 per cent lower than the previous season’s production of 112.5MMT.

Like corn, the South American soybean production numbers remain steady with Brazil estimated to produce 123MMT this summer and Argentina expected to harvest 53MMT. Brazil’s National Supply Company (Conab) released estimates last week that seem to ignore drought worries and support the USDA number. They are forecasting soybean production at 122.2MMT off 36.8 million hectares.

Eventually, soybean losses will happen if it remains dry, but most agronomists believe that the current lack of moisture only affects the first corn crop at this point in the season. The state raising the biggest concern is Rio Grande do Sul, the top summer corn producer in the country. Conab maintained its estimate for first crop corn production at 26.6MMT, down 3.8 per cent compared with 2019, based on a 1.1 per cent increase in the seeded area.

When it comes to wheat, global production for the 2019/20 marketing year was reduced by a meagre 1MMT to 764.4MMT. Half of that decrease was in Australia, where the USDA decreased production by 0.5MMT to 15.6MMT. While this is getting closer to reality, it is still at least 1MMT higher than the majority of domestic estimates.

Argentine production remained at 19MMT against the latest Buenos Aires Grain Exchange (BAGE) estimate of 18.8MMT. BAGE increased their estimate by 0.3MMT last week on the back of better than expected yields in the late-harvested regions. The balance of the global production decrease was in Europe with the Russian crop decreased by 1MMT to 73.5MMT and the European Union (EU) crop increased by 0.5MT to 154MMT.

On the wheat export front, global trade for the 2019/20 marketing year was increased by 1.3MMT to 181.1MMT. The US, Argentine and Canadian numbers were all unchanged compared to the December report. The major tweaking was in Europe where the Ukrainian and EU export numbers were increased by 0.5MMT and 2MMT respectively, and the Russian forecast was decreased by 1MMT on the back of lower supplies.

The USDA adjustment to the Australian wheat export number was hardly worth the token effort with a mere 0.2MMT shaved off expectations. Like the production forecast, the figure of 8.2MMT is at least 1MMT higher than most domestic expectations, and it simply should not be possible given domestic demand and the poor harvests receivals in Western Australia and South Australia.

Looking at the US new crop, the USDA reckons their farmers have planted 12.47 million hectares of winter wheat. This compares to 12.61 million hectares last year and is the smallest winter wheat area since 1909.

On the barley side of the equation, global production was decreased by 0.7MMT to 156MMT up more than 12 per cent, or 17.4MMT compared to the 2018/19 season. Australia was down 0.2MMT to 8.2MMT, EU up 0.5MMT to 62.75MMT and several minor producers collectively down by 1MMT.

The net change to global demand was minor at 0.1MMT, but the USDA did make some quite hefty regional adjustments to arrive at total demand of almost 153MMT. The big one was a 0.9MMT decrease in Chinese demand, potentially decreasing Australian exports over the coming months.

Countering that were demand increases of 0.4MT in the European Union and 0.6MMt in Turkey. Most importantly, Saudi Arabian demand was untouched at 8.5MMT, a year-on-year increase of 20 per cent or 1.5MMT. All this leaves 2019/20 global ending stocks at just under 21MMT, down 1MMT on last season’s number.

It could be said that last week’s WASDE report was mildly bullish for wheat, barley and corn, but on the whole, it was quite underwhelming for a report that invariably has huge trade and market ramifications.

Read the full USDA report here.

Global grain markets looking for direction after benign WASDE report…

Posted by | Grain Brokers Australia News, USDA WASDE Report, Weekly Commentary | No Comments

The United States Department of Agriculture (USDA) released their November World Agricultural Supply and Demand Estimates (WASDE) to the market last Friday (Saturday morning down under) and there was nothing to get the trade, or futures markets, too excited.

Chicago Board of Trade (CBOT) December wheat futures closed the week at 510¼ cents per bushel (c/bu), down 2¼ c/bu on the day and down 5¾ c/bu for the week. Wheat futures have been trending downward since a 3-month high of 532¼ c/bu was set on October 18. That equates to a fall of almost AU$12 over the last three weeks.

The December corn futures contract closed last Friday’s trade at 377¼ c/bu, up 2 c/bu on the day but down 12 c/bu for the week. The soybean contract for November closed at 919½ c/bu, down 5½ c/bu on the day and down 4¾ c/bu for the week. Like wheat, both corn and soybean futures have been trending lower in recent weeks and have lost the equivalent of just under AU$12 and just over AU$11 respectively since the highs of mid-October.

The WASDE wheat production numbers were basically a juggling act, the result being a small global increase of around 0.3 million metric tonne (MMT). Australian production was decreased by 0.8MMT to 17.2MMt, similar to last year’s final number. However, this is still around 1.5MMT above many domestic trade estimates, and a further reduction is expected in the next report, due for release on December 10.

Argentine wheat production was decreased by 0.5MMT to 20MMT. Like Australia, this is around 1.5MMT above the most recent estimates emanating from the South American republic. Last season’s production was 19.5MMT. Reaping has commenced in many parts of the country, and the Buenos Aires Grain Exchange called the wheat harvest 7 per cent done compared to 11 per cent at the same time last year.

The United States (US) was the other major wheat producer which saw production fall compared to last month. The USDA pegged 2019/20 production at 52.3MMT, a decrease of 1.1MMT, but still, 1MMT higher than last season.

Planting of the next US winter wheat crop is well underway with 94 per cent expected to be planted by early this week. This compares to 89 per cent last week, 85 per cent last year and 92 per cent on average. Crop ratings are expected to be unchanged week-on-week at 57 per cent good to excellent, versus 51 per cent last year.

On the positive side of the equation, Ukraine, Russia and the European Union (EU) all saw increases to their final wheat numbers for the 2019/20 season compared to the October report. Ukraine production was increased by 0.3MMT to 29MMT. This represents a significant year-on-year increase of 4MMT, or 16 per cent.

The USDA increased Russian production by 1.5MMT to 74MMT. Here again, the USDA appears to be conservative with their revised estimate as local Russian forecasts are around 1-2MMT higher. That said, it is still around 2.3MMT higher than 2018/19 production.

The most significant increase to global wheat numbers in Friday’s WASDE report came in the EU. Production was posted at 153MMT, an increase of 1MMT compared to October and an increase of 16MMT compared to last season. However, the USDA number is 3MMT lower than the most recent European Commission wheat forecast of 156MMT.

In France, the European Union’s biggest wheat producer, planting of the winter wheat crop is delayed by wet weather. The French state grains board, FranceAgrimer, estimates that 67 per cent of the soft wheat crop has been planted, up 13 per cent on the previous week, but still well behind the long term average of 82 per cent.

With global wheat demand remaining static, the washup of all of the production changes was an increase in world ending stocks to a record 288.3MMT, 142.6MMT (49 per cent) of which is held outside of China.

On the barley front, the WASDE report was slightly bullish. The USDA cut Australian production by 0.2MMT to 8.4MMT. While this may be achievable, it appears to be on the high side based on the hard finish experienced in almost all the major barley production regions of the country.

Elsewhere, Argentine production was decreased by 0.1MMT to 4.7MMT (5.1MMT last year), the EU was raised by 0.2MMT to 61.8MMT (55.9MMT last year), and Ukraine was increased by 0.3MMT to 9.5MMT (7.6MMT last year).

The USDA increased global barley demand by 0.8MMT, predominantly in Russia, Ukraine and EU and world ending stocks were decreased by 0.8MMT, mostly in Russia and Saudi Arabia. Australian barley exports were reduced by 0.2MMT to 4.3MMT, and China’s barley imports were cut by 0.2MMT to 6.3MMt (5.5MMT last year).

There were several decreases to global corn supply, but most had already been factored into trade calculations, hence the subdued futures market reaction. US production was down by 3MMT after the yield forecast was decreased to 167 bushels per acre (10.5 metric tonne per hectare). Mexican, Ukraine and EU production were cut by 2MMT, 0.5MMT and 0.2MMT respectively, and Russian was increased by 0.5MMT.

US corn demand was down by 1.2MMT, but world demand was increased by 0.8MMT compared to the last WASDE report. World ending stocks are forecast to decrease by 6.6MMT, predominantly in Brazil, China, EU and the US.

The soybean numbers were quite benign, with global production down by 2.4MMT, mainly in India and Canada, and global demand down by 2.4MMT, primarily in India, China and the United States.

The grain market needs news, and the WASDE report provided nothing that wasn’t already known and factored into global thinking. From a wheat and barley perspective, 2019/20 production is basically known, even though the USDA numbers still need a little tweaking in several key jurisdictions.

A resolution, or otherwise, to trade disputes involving China is a key driver in the near term. The big one, of course, is the US standoff, with Trump seemingly dousing the most recent positive news with his usual Twitter diplomacy.

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