The April 11 World Agricultural Supply and Demand Estimates (WASDE) report featured some bullish changes to U.S. corn demand and ending stocks that were not unexpected. However, it was the decision to leave Brazil corn and soy production unchanged that was the big surprise.
Here is a look at each commodity and the changes.
CORN
Traders were looking for bullish changes to corn exports, ethanol usage and feed, and they got two of those. With U.S. corn exports running 18% ahead of last year, it would not have been a surprise for USDA to raise exports. They left exports alone but raised both feed and residual and corn for ethanol use by 25 million bushels (mb) each to drop ending stocks by 50 mb to 2.122 billion bushels (bb). This is just slightly higher than the trade had expected but still a comfortable carryout and the highest in the last five years.
It was on the world front where the surprises came. With Dow Jones traders looking for a 3.1 million metric ton (mmt) decline in Brazil corn production, USDA chose to leave it unchanged at 124 mmt (4.88 bb), sending the spread between Conab (112.7 mmt -- 4.44 bb) to a very wide 11.1 mmt, or a huge 437 mb. With respect to Argentina, that corn crop was dropped 1 mmt to 55 mmt (2.16 bb) to just slightly under trade expectations. However, even that was 4.5 mmt (177 mb) higher than the Rosario Exchange forecast on Wednesday, which was reduced because of insect and disease damage. Other minor world changes sent world ending stocks down just 1.6 mmt from the March report, at 118.3 mmt (4.66 bb). Other changes include South African production off 1.5 mmt to 14 mmt (551 mb) and Mexico production decreasing by 700,000 mt to 23.3 mmt (917 mb). On the import side, EU corn imports fell by 1 mmt to 21 mmt (827 mb), as their maize production increased by nearly 1 mmt to 61.1 mmt (2.4 bb). Mexico imports were raised by 500,000 mt to 21.1 mmt (825 mb) to account for the smaller crop. Feed use in South Africa fell by 400,000 mt, and South African exports fell by 900,000 mt, while Russian corn exports rose by 300,000 mt. The season average farm price on corn was reduced by a nickel to $4.70.
Overall, the report was sort of a ho-hummer, but the reaction was a negative one as corn futures began and ended with a loss.
SOYBEANS
Domestically, USDA chose to reduce U.S. soybean exports by 20 mb, residual by 9 mb and seed by 2 mb, but surprisingly left crush unchanged, despite the record crush pace. That led to a 25 mb increase in U.S. soybean ending stocks to 340 mb -- 21 mb above the average trade estimate. As in corn, the season average price was reduced by a dime, to $12.55 per bushel. In other changes, soybean oil stocks rose by 50 million pounds from 1.582 million pounds to 1.627 million pounds.
With USDA's decision to leave Brazilian corn production unchanged, it was probably more baffling it decided to leave soybean production unchanged, at a lofty 155 mmt (5.69 bb). With 80% of the Brazil soy harvest already completed, one would think the spread between Brazil's Conab and USDA would likely narrow. It did not, and USDA remains 8.5 mmt (or 312 million bushels) higher. USDA chose to leave Argentine soybean production unchanged at 50 mmt (1.8 bb) -- just 200,000 mt less than what the trade had expected.
There were few other important world changes. The European Union soy imports were increased by 500,000 mt to 14.3 mmt (525 mb), and Paraguay, on the heels of a small increase in production to 10.5 mmt (386 mb), is expected to increase exports by 200,000 mt to 6.5 mmt (238 mb). The net effect of the soybean changes resulted in just a modest fall in world ending stocks to 114.3 mmt (4.2 bb) compared to trade expectations for 112.6 mmt (4.13 bb).
Soybean futures were lower before the report and continued to trade down throughout the day based on what was a neutral-to-bearish report. It would be much more bearish if traders believed USDA's Brazil soy production estimate.
WHEAT
Dow Jones trader survey was looking for a modest bump in U.S. wheat ending stocks based on lower feed use. USDA did come out with a larger feed and residual reduction than expected by dropping it 30 mb to 90 mb. Wheat imports were raised by 5 mb, leading to a 25-mb increase in ending stocks, to 698 mb. That figured to be about 15 mb above pre-report expectations. The season-average farm price was lowered by a nickel, to $7.10 per bushel.
There were several minor changes to world wheat numbers, but the net effect was negligible, with world ending stocks hardly changing, and ending up at 258.6 mmt (9.5 bb). The most notable changes seemed to be on the export front, with Russian wheat exports increased by 1 mmt to 52 mmt (1.9 bb), and Ukraine exports rising by 1.5 mmt to 17.5 mmt (643 mb). Exports from the European Union were reduced by 2 mmt to 34.5 mmt (1.27 bb). Food, seed and industrial use in India increased by 2 mmt. The world ending stocks number of 258.6 mmt turns out to be the lowest since 2015-16. Wheat prices, lower before the report, closed sharply lower on the slightly bearish report.
FINAL THOUGHTS
The April 2024 WASDE report, a non-event, will likely soon be forgotten. Perhaps the biggest surprise is the fact that USDA chose to leave both Brazil's corn and soybean estimates unchanged, though Conab and several other private analysts, crop scouts and ag advisers, some with a South American presence, are far lower than USDA. Over the next few months, that mystery should be solved, especially soybeans with the harvest now 80% done in Brazil. Now, the trade will refocus on weather in Brazil and planting in the U.S.
At market close on Thursday, May corn finished down 5 1/2 cents at $4.28 3/4, May soybeans finished down 5 1/2 cents at $11.59 1/4, and May Kansas City wheat closed down 11 1/4 cents at $5.83 1/4.
Dana Mantini can be reached at dana.mantini@dtn.com.
Follow Dana Mantini on Twitter @Mantini_r.
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