The February World Agricultural Supply and Demand Estimate report is generally benign, but market bulls who were expecting changes with the current robust demand for corn and soybeans
were disappointed in the U.S. Department of Agriculture's projections.
U.S. corn ending stocks were a bearish surprise coming in nearly 140 million bushels above trade estimates. The USDA estimated stock at 1.502 billion bushels, a 50 million bushel drop which came from the same revision upward in exports.
“USDA kicked the can down the road with this report,” said Shawn Hackett, with Hackett Financial Advisors.
Hackett said USDA probably won’t make the needed revisions until some point down the road, likely in the Quarterly Stocks Report. The minor change in exports was also confusing considering USDA did raised China’s corn import forecast by 6.5 million metric tons to 24 million metric tons.
World corn ending stocks were actually raised 2.7 million metric tons to 286.5 million metric tons, and South American production was left unchanged. Brazil corn production was pegged at 109 million metric tons, with Argentina at 47.5 million metric tons, which is the same as January.
Domestic soybean ending stocks came in at 120 million bushels, which the agency lowered by 20 million bushels from last month. The change came directly from an increase in exports which are now projected at 2.25 billion bushels. Meanwhile, the crush figure was left unchanged. Many in the trade believe the export number will eventually need to be increased as export sales, prior to the report, were already at 97% of USDA’s projection for the whole marketing year with nearly seven months remaining. Brian Basting with Advance Trading said USDA is being too conservative with their export projection.
Hackett believes the highs may be in the soybean market, at least for the time being.
“I think in this $14 level we are already doing some rationing of demand,” he said.
Plus, Hackett believes that even though the Brazilian harvest has been delayed, the impending crop will keep prices in the U.S. from having to go much higher. USDA left South American production unchanged, with Brazil at 133 million metric tons and Argentina at 48 million metric tons. World soybean carryover was lowered 900,000 metric tons to 83.4 million metric tons and right in line with trade guesses.