USDA tightens U.S. soybean stockpiles

Date:02-12-2020

The U.S. soybean stockpile dwindles, according to the USDA Tuesday.

As a result, the CME Group’s farm markets trade mixed.

At the close, the March corn futures finished 2¢ lower at $3.79¼. May corn futures finished 2¼¢ lower at $3.84¼.

March soybean futures closed ½¢ higher at $8.84¾. May soybean futures ended unchanged at $8.97¾.

March wheat futures closed 10¢ lower at $5.42.

March soymeal futures finished $0.60 per short ton lower at $290.80. March soy oil futures closed 0.10¢ higher at 30.72¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.08 per barrel higher, the U.S. dollar is higher, and the Dow Jones Industrials are 36 points higher.

U.S. ENDING STOCKS

In its report, the USDA pegged the U.S. 2019/2020 corn ending stocks at 1.892 billion bushels vs. the trade’s expectation of 1.864 billion and the USDA’s January estimate of 1.892 billion.

For soybeans, the U.S. 2019/2020 ending stocks are seen at 425 million bushels vs. the trade’s expectations of 443 million and the USDA’s January estimate of 475 million.

The U.S. 2019/2020 wheat ending stocks were pegged at 940 million bushels vs. the trade’s expectation of 952 million bushels and the USDA’s January estimate of 965 million.

2019/2020 WORLD CROP PRODUCTION

In its report Tuesday, the USDA pegged Brazil’s 2019/2020 corn crop at 101 million metric tons vs. the trade’s expectation of 100.0 mmt and the USDA’s January estimate of 101 mmt.

Brazil’s soybean crop is pegged at 125.0 mmt. vs. the trade’s expectation of 123.7 mmt and the USDA’s January estimate of 123.0 mmt.

For Argentina, its 2019/2020 corn output is pegged at 50.0 mmt. vs. the trade’s expectations of 50.0 mmt. and the USDA’s January estimate of 50.0 mmt.

Argentina’s soybean production is estimated at 53.0 mmt. vs. the trade’s expectation of 53.2 mmt. and the USDA’s January estimate of 53.0 mmt.

WORLD ENDING STOCKS 2019/2020

The USDA sees the world’s corn ending stocks at 297.8 mmt. vs. the trade’s expectation of 297.2 mmt. and USDA’s January estimate of 297.8 mmt.

For soybeans, the world ending stocks are pegged at 98.9 mmt. vs. the trade’s expectation of 96.9 mmt. and the USDA’s January estimate of 96.7 mmt.

In its report, the USDA printed the world’s wheat ending stocks at 288.0 mmt. vs. the trade’s expectations of 287.4 mmt and the USDA’s January estimate of 288.1 mmt.

TRADE RESPONSE

Jason Roose, U.S. Commodities, sees no surprises in today’s USDA data.

“No surprises and very few changes were made in February’s USDA Crop Report from the January numbers. The corn exports were lowered slightly and ethanol usage was increased, which offset. And the February corn carryover at 1.892 bln was left unchanged from last month. The soybean exports were increased 50 mln, which lowered the ending stocks from 475 million to 425 million, which will be price supportive as South America becomes less competitive,” Roose says.

Sal Gilbert, Teucrium trading, says that this report was basically a nonevent.

“The exception is that the soybean exports were raised, even though no expectations of Chinese purchases related to the tariff war resolution were included in today’s estimates,” Gilbert says.

He added, “U.S. soybean exports to date have been strong, and most expectations are that when China finally steps in, domestic stocks could continue tightening, which is likely why the USDA continues to cautiously lower soybean ending stocks. All eyes will be on Chinese demand and South American weather for the foreseeable future.”

Jason Ward, Northstar Commodity managing director, says that the USDA made one change to the balance sheet and it was an increase of 50 million bushels in the export category to 1.825 bil/bu, or a weekly average of 20.32 mil/bu.

“This is clearly an estimate by WASDE of increased Chinese demand in the coming months, in our view not on current demand, because frankly through the end of May, Brazilian soybeans are likely to remain cheaper than U.S. soy. But this was their target change today,” Ward says.

Ward added, “We have no disagreements with the reports today, but expect to continue to see usage adjustments going forward in the corn in feed/residual and corn used for ethanol to account for lower test weight corn. At the same time, lower exports this month shouldn’t be a huge surprise.”

Greg Lumsden, product line leader for Cargill MarketGuide, says that today’s report was largely a nonevent.

“On corn we saw a 50 million reduction to exports but an offsetting increase of ethanol by the same amount. Net-net the corn carry was left unchanged leaving corn to grind in its recent $3.70-$3.90 price range,” Lumsden says.

Lumsden added, “With South American time frame winding down, our spring months away, and no sign of Chinese buying, the market feels content to bide its time and stay in a low volatility channel for the foreseeable future. An uptick in seasonal demand led by Chinese buying could spark the market, especially with the funds positioned short, but it would be met by heavy producer selling and be capped at 10¢ to 20¢.”

Regarding the soybean market, given the market reaction, today, the market still feels skeptical of the USDA’s increase in demand, Lumsden says.

“Much like corn, if we do in fact see some actual Chinese buying, we could see a break from the recent bearish trend and a modest rally,” Lumsden says.