FI Grain Market Update

Apr 10, 2018

Please click on the below link to download the FI Grain Market Update for 04/10/18

USDA released their April S&D report, incorporating changes from March 1 stocks.

USDA Executive Briefing

https://www.usda.gov/oce/commodity/wasde/Secretary_Briefing.pdf

Initial reaction

Bullish soybeans, bearish soybean oil, neutral meal, neutral corn and neutral wheat, in our opinion. Larger than expected cut in Argentina soybean production and less than expected projected US carryout was viewed as supportive for US soybean futures. There was no change to the US soybean export program, and no mention to the US/China trade tariff situation in their monthly text, which was welcome news by some bull traders. Large soybean oil stocks will keep prices in that market from rallying anytime soon. Corn and wheat balance changes were mostly as expected. Drawdown in global corn inventories should undermined feedgrain prices during second half 2018.

Soybeans

  • US stocks of soybean for 2017-18 were lowered 5 million bushels to 550 million by USDA from March due to a cut in US residual/seed by 5 million bushels and upward revision in crush by 10 million to record 1.970 billion bushels. The result decreased the STU to 13.2 percent versus 13.3% last month.
  • There was no change to the US export program, and no mention to the US/China trade tariff situation in their monthly text, which was welcome news by some bull traders.
  • The US carryout came in 24 million bushels less than a Reuters trade estimate.
  • US soybean stocks of 550 million bushels are largest since 2006-07.
  • The increase in the US crush by 10 million increased soybean meal production by 250,000 short tons and soybean oil production by 115 million pounds.
  • US soybean oil for biodiesel use was lowered 200 million pounds and exports raised 100 million. Soybean oil stocks are up 215 million pounds from previous month, bearish in our opinion.
  • USDA increased US soybean meal imports by 100,000 short tons. The 350,000 short ton increase in supply was offset by a 250,000 short ton boost to domestic usage and 100,000 short ton increase to exports. Imports are now pegged at 400,000 short tons.
  • Argentina’s soybean crop was lowered to 40 million tons from 47 million tons last month, aggressive but needed.  Production came in 2.7 million tons below a Reuters guess. This was supportive.
  • Brazil soybean production was increased 2.0MMT from previous month to 115 million tons. Recent estimates put the crop between 114 and 119 million tons.
  • World soybean production was revised down 6.1MMT from last month and is now down 16 million tons from last year.
  • Global soybean stocks were taken down 3.6 million tons from last month and are now down 5.9 million tons from a year ago.
  • Brazil soybean exports were raised 2.6 million tons (remember +1.5MMT last month) and Argentina was lowered 2.6 million tons (remember -1.7 last month).
  • Argentina’s crush was lowered nearly 1.8 million tons to 41.23 million tons (43.3 in 2016-17), and Argentina’s soybean meal exports were taken down 1.3 million metric tons to 29.5MMT (31.32 in 2016-17). Brazil’s soybean meal exports forecast was upward revised 200,000 metric tons to 15.45 million tons.
  • There was no change to China’s 2017-18 soybean balance sheet.
  • Back to the US, USDA left its soybean oil yield unchanged and increased soybean meal from 47.24 to 47.26.
  • The USDA US season-average soybean price was narrowed 10 cents on each end to $9.10 to $9.50 per bushel. The soybean meal price ranges were raised $15 per short ton on the low end and $5 on the high end to $340 and $360) and soybean oil was taken up a half cent on each end to 30.50-33.50 cents per pound.
  • USDA lowered global oilseed production by 6.1 million tons to 568.8MMT (575.9MMT in 2016-17) with lower soybeans offset by higher sunflowerseed, copra, palm kernel and rapeseed production.

Corn

  • US stocks of corn for 2017-18 were increased 55 million bushels to 2.182 billion by USDA from March due to a 50-million-bushel downward revision in US corn for feed usage to 5.500 million bushels and 5 million decrease in US food/seed. The result decreased the STU to 14.8 percent versus 14.4% last month. Remember they increased the US carryout 225 million bushels in February.
  • USDA lowered Argentina corn production by 3.0 million tons to 33 million tons. USDA lowered Argentina domestic feed by 1.0MMT and exports by 1.0 million tons.
  • USDA lowered its 2017-18 production outlook for Brazil by 2.5 million tons to 92.0 million (most are around 89 million tons) and raised Brazil’s exports by 2.0 million tons to 33.0 million.
  • Combined Argentina and Brazil corn production is projected 14 million tons lower than 2016-17.
  • World corn production was off 5.7MMT from the previous month and stocks were down 1.4MMT
  • There were no changes to the China balance sheet.
  • USDA projected season-average US cash corn price received by producers was narrowed 5 cents on both ends to $3.20 to $3.50 per bushel.
  • USDA lowered US sorghum FSI by 5 million bushels, lowered barley feed by 10, and lowered oats feed by 5.

Wheat

  • USDA increased US wheat stocks by 30 million bushels to 1.064 billion, by cutting feed use by 30 million bushels. The US STU is currently at 52.9% versus 50.6% in March.
  • By class, US White stocks were lowered 10, SRW lowered 3, HRS raised 5, HRW increased by 35, and Durum raised by 3 million.
  • Global wheat production was taken up 1.0MMT to 759.8 million tons, 9.1MMT above 2017, and world ending stocks raised 2.3MMT to 271.2 million, 16.6 million tons above 2016-17.
  • There were no major changes in other large exporting country balance sheets.
  • USDA’s U.S. 2017-18 season-average farm price was unchanged at $4.60-$4.70/bu.

FI Price Projections:

  • May soybeans $1.00-$10.85 range; November $9.50-$11.75 range.
  • May soybean meal $370-425 range; December $360-$435 range.
  • May soybean oil 31.10-33.20 range; December 32.00-34.00 range.
  • May corn is seen in a $3.75-$4.15 range over the short term; December $3.85-4.50 range.
  • Chicago May wheat is seen in a $4.35-$5.25 range. KC May in a $4.55-$5.60 range, and May MN in a $5.75-$6.50 range. Wheat September ranges: Chicago $3.80-$4.25, KC $4.70-$6.00, MN $5.50-$6.75
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