FI Grain Market Update 02/08/23

PDF Attached

 

USDA released their February S&D report

 

Reaction:  Initially bearish but a buying opportunity for bull traders.

 

USDA NASS briefing

https://www.nass.usda.gov/Newsroom/Executive_Briefings/index.php

USDA OCE Secretary’s Briefing

https://www.usda.gov/oce/commodity-markets/wasde/secretary-briefing

 

USDA lowered Argentina corn and soybean production by a less than expected amount and this initially sent those markets lower post USDA report. Wheat was seen neutral. We remain bullish over the short term based on Argentina production cuts. Wheat may follow corn and soybeans higher.

 

Major highlights:

US soybean stocks 225 vs. 210 last month (15),  +14 million vs. trade

US corn stocks 1267 vs. 1242 last month (25),  +1 million vs. trade

US wheat stocks 568 vs. 567 last month (1),  -8 million vs. trade

 

Brazil Soy 153.0 vs. 153.0 last month (0),  0.0 million vs. trade

Arg. Soy 41.0 vs. 45.5 last month (-4.5),  -1.3 million vs. trade

Brazil Corn 125.0 vs. 125.0 last month (0),  -0.2 million vs. trade

Arg. Corn 47.0 vs. 52.0 last month (-5),  -1.5 million vs. trade

 

WLD soy stocks 102.0 vs. 103.5 last month (-1.5),  0.0 million vs. trade

WLD corn stocks 295.3 vs. 296.4 last month (-1.1),  +0.6 million vs. trade

WLD wheat stocks 269.3 vs. 268.4 last month (0.9),  +0.7 million vs. trade

 

The US soybean crush was lowered a needed 15 million bushels. A slow December crush and less than expected January NOPA rate warranted this, despite excellent US cash crush margins. As a result, US soybean stocks went up 15 million bushels to 225 million (14 million above a trade average), still below 274 million at the end of 2021-22. With a lower crush and modest increase in the soybean meal yield, USDA trimmed US soybean meal production by 200,000 short tons. They decided to offset the lower supply by cutting domestic usage by 200,000. For soybean oil, USDA raised the yield to 11.77 pounds per bushel from 11.72 previous month. This helped offset the decline in 2022-23 soybean oil production, seen at 26.245 billion pounds, down 65 million from January and compares to 26.143 billion pounds year earlier. USDA lowered 2022-23 US soybean oil exports by 100 million pounds to 700, nearly a billion and half pounds below 2021-22! 

 

USDA lowered US corn for ethanol use by 25 million bushels. We thought the cut could have been as high as 50 million bushels. No other demand changes were made and ending stocks were raised 25 million to 1.267 billion bushels, in line with trade expectations. USDA made very little to its US all wheat balance sheet. US ending stocks were up 1 million bushels to 568 million and compares to 698 million year earlier. But by class, SRW wheat stocks were upward revised 12 million, White wheat lowered 11, durum down 1 million and HRW off one million from their January estimate.

 

For the world balance, the largest impact we saw was the less than expected cut to Argentina soybean and corn production, now estimated at 42.3 million and 48.5 million tons, respectively, 1.3 and 1.5 million below the average trade guesses. The Argentina soybean crop was down 4.5 million tons from January and corn by 5.0 million. Note much of the trade is near 35 million tons for Argentina soybean production and 41-43 MMT for corn. Brazil soybean and corn production was left unchanged by USDA from the previous month. Note USDA took Brazil’s soybean export projection up by 1 million tons to 92 million, a record, and left China soybean imports unchanged.  For wheat, we were a little surprised to see USDA raise Russia wheat production by 1 million tons after making comments that their crop was lower than what Russia’s AgMin had been reporting. Australia wheat output was upward revised 1.4 million, Brazil up 0.5 million and China by 0.8 million.

 

Global ending stocks for soybeans were downward revised by 1.5 million tons for soybeans and 1.1 million for corn. All-wheat was raised 0.9 million. Grain ending stocks are projected to decline from the previous year while global ending stocks for soybeans are still estimated to increase, now by 3.2 million tons, from 2021-22. 

 

Attached PDF includes FI snapshot

 

Price outlook:

March corn $6.40-$6.85 range. May $6.25-$7.00

 

Soybeans – March $14.85-$15.50, May $14.75-$16.00

Soybean meal – March $450-$520, May $425-$550

Soybean oil – March 58.50-63.00, May 58-70

 

Chicago – March $7.25 to $7.90, May $7.00-$8.25

KC – March $8.40-$9.10, $7.50-$9.25

MN – March $9.00 to $9.75, $8.00-$10.00