Given that U.S. corn exports are running about 25% ahead of last year’s pace, most traders feel it is just a matter of time before USDA increases their export projections for this marketing year. But that time was not this week.
USDA’s quiet Crop Production report March 11 was historically in tune, although contrary to the demand hopes traders harbor. Admittedly, with the back-and-forth tariff developments, it does make sense for USDA to keep demand numbers unchanged for this month.
On the world numbers for corn, USDA made a few changes.
- Lower world corn carryout stocks. USDA’s number dropped 1.4 million metric tons. Reductions in carryout stocks in other countries, like South Africa, is why USDA lowered the carryout stocks. With world carryout stocks on corn at the lowest level since 2014, this puts a lot of pressure on the U.S. to grow a big crop this year to keep world and U.S. corn stocks plentiful. In my eyes, it should keep nearby corn futures supported here in the near term.
- Smaller China corn imports. USDA set that number at just 8 million metric tons. This is down from last year where China imported 23.4 mmt. The reduction comes from China being more self-sufficient in growing more corn acres, a slowing economy and using alternatives to corn.
No changes to U.S. soybean numbers
The agency left the U.S. soybean carryout stock projection at 380 million bushels. Export demand and crush demand in the U.S. has been running in line with USDA projections. The tariff talks in the past few weeks seem to have had little impact on U.S. soybean prices. The “wet blanket” on the soybean market has to do with a large South American crop that is being harvested and world ending stocks at a record level.
No adjustment to South America’s crop numbers
USDA did not make any adjustments to the corn and soybean crops in Brazil or Argentina. The report does reduce world carryout stocks on soybeans by 2.9 million metric tons. The big change: World soybean stocks decreased because USDA increased the world soybean crush number by 2.9 mmt, thus lowering world soybean carryout by a like amount.
World wheat stocks are tighter
For wheat, USDA did make a few changes. We saw USDA lower their projection on exports and increased their projection for imports into the U.S. The USDA increased the US carryout stocks by 25 million bushels. This was not a big surprise since U.S. exports have been average.
On the world wheat numbers, we saw USDA increase carryout stocks mainly from an increase in production from Australia. World wheat stocks still remain at the tightest levels since 2015.
Where do we go from here?
Overall, the report was not a big surprise as USDA made very few minor changes. Looking ahead, the market will shift its focus to the Planting Intentions and Quarterly Grain Stocks reports March 31. This will be one of the biggest reports of the year and is sure to contain some surprises. Add this to ongoing daily tariff talks and it looks as though we are in for a volatile spring and summer growing season.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net® is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through RJO’Brien in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading information and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you.