March 03, 2024

Argentine production drop reflected in report

KANSAS CITY, Mo. — Expectations of reductions in Argentine corn and soybean production were reflected in the U.S. Department of Agriculture’s supply and demand estimates report on March 8.

Arlan Suderman, StoneX Group chief commodities economist, noted the USDA moves in a webinar.

There have been reports of continued heat and dryness during February and into early March in Argentina. What are your thoughts on those corn and soybean estimates?

Suderman: We expected Argentine numbers to be the big ones in the report and they were, with the corn crop shrinking by 7 million metric tons to 40 million metric tons. Soybeans came down by 8 million metric tons to 33 million metric tons.

Both of those were a little below our estimate and quite a bit below the trade estimate. There was no change to Brazil’s production estimate, and I think that was justified.

I think USDA is getting a lot closer with these cuts. I do believe they’re justified but I do believe that we could go down another 2 to 3 million metric tons on both the Argentine corn and soybeans.

I have heard an estimate as low as 25 million metric tons for soybeans. That’s an outlier estimate at this point. My industry contact in Argentina is saying 28 to 30 million for soybeans and 38 to 40 million for corn.

The USDA cut U.S. corn exports by 75 million. Was that in line with your pre-report estimates?

Suderman: I think they overdid it. That’s a little too aggressive right now, but I do think after we get the quarterly stocks report on March 31, that April crop report is going to see an increase in feed usage. So, that’s something that I’m expecting to offset some.

With exporting less corn it’s going to show that we’re catching up on feed usage a little bit. I think they cut the food usage estimate too far when they started the year and need to come back a little bit. They were 5.7 billion a year ago and they cut it by over 400 million bushels ad I think they over did it.

On exports, I’m a little a little higher than USDA, as well. I think they overdid that, too.

Soybean ending stocks for 2022-2023 were reduced by 15 billion bushels to 210 million bushels, the lowest in seven years.

Suderman: Soybean exports were increased by 25 million bushels, crush cut by 10 million, so ending stocks going down by 15 million bushels. The crush level is still 10 million bushels above where I’m at and USDA’s export number is 15 million bushels above my estimate. So, my ending stocks number is 236 million bushels for soybeans.

I do see more declines in exports. I think we’re going to have a slow start to the export season next fall because of remaining Brazilian supplies based on their big crop.

What are some final thoughts on this report and the market reaction as the trade turns to the March 31 quarterly stocks and prospective planting reports?

Suderman: Overall, the market is mainly trading headlines off of Wall Street with a focus on the Federal Reserve this week.

When you look at the response of the market from the report, the headline-driven algorithm gave the response and then in a matter of minutes we were back to basically trading where we were before the report came out. Meaning that even though the Argentine numbers came out below expectations, everything was pretty much what the market expected, the whisper numbers so to speak, and we’re back to trading those Wall Street headlines again with a strong dollar at three-month highs.

The strong dollar is creating some headwind for the commodity sector, and soybeans are trying to go against that with a short Argentine crop.

Tom Doran

Tom C. Doran

Field Editor