MINNEAPOLIS — Agricultural supply and demand estimates from the U.S. Department of Agriculture set the table each month for the grain market, pushing commodity prices up, down or sideways depending on the numbers.
However, since the release of the Dec. 11 crop balance sheets, the trade was left to even more than normal speculation as the government shutdown kept the January USDA reports from being released.
The supply and demand, quarterly grain stocks, winter wheat seedings and 2018 crop production summary were finally released Feb. 8 with no major surprises.
“Overall, a lot of the estimates were built into the trade. The trade did a pretty good job for the most part,” Brian Basting, Advance Trading market analyst said in a Minneapolis Grain Exchange-hosted teleconference.
“They did underestimate the reduction in the corn and soybean crops a little bit, particularly corn, and the trade did underestimate the drop in the winter wheat seedings, but otherwise most of those numbers were in line. As a result, we’re seeing the market kind of continue its sideways, choppy trading for now.”
Basting broke down the numbers from the four reports during the teleconference.
Soybeans have been a major focus due to the trade issues with China, the largest importer of the U.S. commodity. The average trade guess prior to the soybean supply and demand report anticipated a year-end surplus of 926 million bushels. What are some highlights of the soybean balance sheet?
The USDA come out with a lower final production for soybeans — about 56 million bushels lower — to 4.544 billion bushels. The combination of everything lowered ending stocks of soybeans from 955 million bushels in December to 910 million in February. Last year, for reference, it was 438 million bushels. So, the carryout projected for this year is still more than double what it was last year.
As expected by the trade, the Brazilian soybean crop was lowered by about 5 million tons but they also lowered the Chinese imports from 90 million tons of soybeans for the 2018-2019 crop year to 88 million tons. The net of that was the fact that USDA lowered U.S. soybean exports from 1.9 billion bushels in December to 1.875 billion bushels.
What will the trade be monitoring on the soybean side going forward?
The soybean market will now focus very closely on South American weather. Brazil’s final crop size will be determined over the next month to six weeks and stretching that out into April in Argentina.
We’ll wait to see what the USDA thinks at the upcoming ag outlook forum as far as acreage. But there seems to be a bias that we may not see as much of a reduction in soybean acres as we thought earlier due to some issues with late fall tillage work, input prices for corn edging up a bit, but we do look for some type of a reduction in soybean acreage in 2019.
At some point the USDA hopefully will come out with the March prospective plantings report and we’ll get a good idea of that. I think the thing that will affect the soybean market will be South American weather over the next 30 to 45 days.
Pre-report trade estimates had corn ending stocks at 1.708 billion bushels compared to 1.781 billion in the December estimate. The USDA’s newest projection is a 1.735 billion bushel surplus.
The market is reacting a little negatively in corn. USDA lowered the corn crop estimate in the U.S. from last fall by about 206 million bushels, going from 14.626 billion bushels to 14.420 billion. There were some significant reductions in states in the northern Corn Belt from what they were in December.
However, USDA also lowered the feed and residual number by 125 million bushels. That was reflected in the weaker than expected feed and residual usage in September-November. USDA also lowered the ethanol for corn usage by 25 million bushels. The ethanol plants are struggling now with some negative margins. Those usage declines offset quite a bit of that production decline.
I think in corn now the big factor will be to watch the double-crop Brazilian corn crop which is being planted now. The weather market for that will stretch into March and April. If they do not have a weather issue like they had last year there’s a possibility of a bumper crop this year and a lot of export competition.
Another key report Feb. 8 provided a first look at winter wheat seedings. Were there any surprises?
Hard red winter wheat seeding of 22 million acres for 2019 was a surprise. The trade estimates were closer to 22.6 million acres.
We had some challenges last fall in parts of Kansas for example with their very wet fall harvest. It really delayed their soybean harvest and that ended up negating any chance to get the wheat planted. So, there’s a little bit of a foundation for a firmer market in 2019 with a lower than expected HRW seedings number.
The big news for HRW is the higher than expected Dec. 1 quarterly grain stocks total that was a function of the lower than expected feed residual usage last fall. The combination of a lower feed residual number and lower seed use (based on the seeding report) boosted the HRW carryout by 23 million bushels, from 468 million in December to 491 million in February.
All in all for the wheat market, it was kind of a neutral report, a little bit supportive on the winter wheat seeding side but a little negative on the usage side and I think overall the market is reflecting that with very little change.