Grain Outlook Brazil pegged as leading corn exporter

The following marketing analysis is for the week ending Feb. 10.

CORN — Corn trended sideways into and out of the February World Agriculture Supply and Demand Estimates report. March corn posted a key reversal lower the day after the report with little fresh news to trade, but reversed that action to close out the week on a positive note. We have a decent idea of corn supply; but how the demand side plays out is questionable. Looking ahead, what will U.S. farmers’ replies show us on the March 31 Prospective Planting report?

The Feb. 8 WASDE report was viewed as neutral with a cut in the corn for ethanol usage category by 25 million bushels to 5.25 billion bushels. This reduction can be justified since we have been running behind what is needed on the weekly ethanol report all year.

Exports were surprisingly unchanged at 1.925 billion bushels. Traders will likely expect that to be reduced on the next report since weekly sales are running 41 percent behind last year and the U.S. Department of Agriculture is expecting just a 22 percent decline in exports year-on-year.

The ethanol change was reflected directly in the ending stocks which are now forecasted at 1.267 billion bushels. This was in line with the average trade estimate of 1.266 billion bushels. The stocks-to-use ratio increased slightly to 9.1 percent. The average farm price was unchanged at $6.70 per bushel.

On the world global balance sheets, world corn ending stocks were pegged at 295.28 million metric tons and slightly higher than the 294.71 mmt estimate.

Argentina’s corn production was slashed by 5 mmt to 47 mmt but is still on the high side compared to other estimates. Its exports were lowered by 3 mmt to 35 mmt. The Buenos Aires Grain Exchange has Argentina’s corn production at 44.5 mmt and lowered the corn rating by 2 percent to 20 percent good/excellent. The Rosario Grain Exchanged lowered their Argentine corn estimate by 2.5 mmt to 42.5 mmt.

Brazil’s corn production forecast was unchanged at a record 125 mmt with feed usage decreased by 3 mmt at the expense of higher exports. Brazil’s corn exports were increased by 3 mmt to 50 mmt (1.97 billion bushels) which would make Brazil the world’s leading corn exporter. Conab pegged Brazil’s corn

in the aftermath of the Chinese surveillance balloon incident. In quick post-report trading, March soybeans spiked to their lowest since Jan. 26 but managed to stay above $15.00 per bushel before closing higher on the day. The balance of the week pushed prices higher to test recent highs near $15.40 per bushel. November soybeans edged sideways through the week but finished the week with a strong close above its 100-day moving average for the first time since Jan. 17.

The February WASDE unexpectedly cut the crush by 15 million bushels to 2.23 billion bushels, which is still a record crush. This was interesting since crush margins have been impressive all year. We may see some of that come back on subsequent reports. Ending stocks increased by a corresponding 15 million bushels to 225 million bushels. This was higher than the 211 million bushel trade estimate. The stocks-to-use ratio rose from 4.8 to 5.2 percent and the average farm price increased by a dime to $14.30 per bushel.

production at a record 123.7 mmt but down from their previous estimate of 125.1 mmt. Brazil’s safrinha corn crop accounts for 76 percent of its total corn production and is harvested June through August.

Weekly export sales were at the top of expectations at 45.7 million bushels. Total export commitments stand at 1.055 billion bushels and are down 41 percent from last year. We need to average 27 million bushels per week to hit the USDA’s 1.925 billion bushel target.

Weekly ethanol production was down 28,000 barrels per day to 1 million bpd. Ethanol stocks were down 25,000 barrels at 24.4 million barrels. Net ethanol margins improved 8 cents to 16 cents per gallon. Gasoline demand at 8.4 million bpd was down 7.6 percent from last year and the four-week average demand was down 2.8 percent from a year ago.

On Jan. 30 the United States requested Mexico provide by Feb. 14 the science it is using to ban GMO corn and glyphosate herbicide imports. This is allowed under the U.S.-Mexico-Canada agreement.

Outlook: We will continue to monitor how small Argentina’s corn crop may shrink, Brazil’s safrinha corn planting progress, China’s corn needs and political events, and what the USDA Outlook Conference on Feb. 23-24 may indicate for this year’s acreage. That’s a lot of juggling in addition to monitoring the U.S. dollar and money flows. March corn ended the week with an outside, higher session which keeps it in its $6.70 to $6.85 per bushel recent trading range. The December contract hasn’t been able to muster a close above $6.00 per bushel since Jan. 18.

For the week, March corn was 3 cents higher at $6.80.5, July was up 1.75 cents at $6.66.5, and December was unchanged at $5.96 per bushel.

SOYBEANS — March soybeans traded lower in the days leading up to the February WASDE report

On the global stage, world ending stocks were as expected at 102.03 mmt compared to 103.52 mmt last month. China’s soybean imports were steady at 96 mmt. Brazil’s soybean production was unchanged at 153 mmt; but exports increased by 1 mmt to 92 mmt. Conab is carrying Brazil’s soybean production at 152.9 mmt. Argentina’s soybean production was slashed by 4.5 mmt to 41 mmt compared to trade estimates of 42.34 mmt. Argentina’s exports decreased by 1.5 mmt to 4.2 mmt. The Rosario Grain Exchange has Argentina’s soybean production at 34.5 mmt (the lowest in 14 years) and the BAGE is using 38 mmt. The BAGE raised Argentina’s soybean rating by 1 percent to 13 percent good/excellent with 57 percent flowering vs. 74 percent on average and 31 percent setting pods vs. 41 percent on average.

Weekly export sales were at the low end of expectations at 16.9 million bushels. Total commitments at 1.754 billion bushels are running 2 percent ahead of last year. We only need to average 8.2 million bushels of sales per week to achieve the USDA’s 1.99 billion bushel forecast.

Outlook: The weather pattern in Argentina over the next few weeks will continue to be a focus for traders, as well as how quickly Brazil can harvest soybeans. Political events between the United States and China may increase in importance if it pushes China to South America even more than before. A strong domestic meal market propelled nearby meal futures close to $500 per ton which lent underlying support to soybeans. The USDA Outlook Conference later this month will focus on the acreage mix this spring in the United States.

For the week, March soybeans rallied 10.5 cents to $15.42.5, July gained 6 cents to $15.22.5, and November jumped 9 cents to $13.78.75 per bushel.

Weekly price changes in March wheat for the week ended Feb. 10: Chicago wheat surged 29.25 cents higher to $7.86, Kansas City soared 36 cents higher to $9.09, and Minneapolis managed an 8.75 cent gain to $9.30.25 per bushel. v