Soybeans: contrary to our expectations, USDA did cut Brazil’s production
Figure 1: Brazil Soybean - Production (M ton)
On soybeans, all eyes were on the Brazilian production. The market was pricing a cut, but whether it was coming or not was dubious – the USDA had not adjusted the country’s production in December in the last 10 years.
The cut to production came in line with the estimates (-2M ton), which left Brazil’s ending stocks smaller by the same amount – adjustments to the carry-in and exports offset each other. In our view, the size of the adjustment makes sense, but it just came as a surprise that USDA broke its previous “modus operandi”.
As a result, world stocks were expected to decline. However, increased stocks in China, pushed by bigger imports, kept them unchanged.
Corn: smaller stocks in the US, but higher in the Black Sea
Figure 2: World Corn – Ending Stocks (M ton)
On corn, USDA trimmed US stocks by 25M bu, due to increased exports. A bullish change on paper, if compared to the market estimates for the report, but not that relevant overall.
Meanwhile, the expected cut on Brazil’s production did not materialize. On average market was estimating production ~1M ton smaller.
On top of that, there were slight increases in Ukraine and Russia’s production – given the recent harvest results published by local agriculture ministries, which showed better-than-expected yields in both nations. That pushed world stocks 1M ton up, surpassing the market’s expectations.
Wheat: Chinese demand incorporated to US’ balance
Figure 3: US Wheat - Ending Stocks (M bu)
On wheat’s side, numbers haven’t deviated much from market expectations – coming slightly below the median estimate in world figures – and most of the changes were somewhat expected.
The most relevant changes in production – the upward revisions in Australia and Canada and the cut in Brazil– came in line with local agriculture ministries’ estimates released in the past few days.
In the US, an increase in export estimates pushed stocks below the market’s lowest estimate, while the median expectation was of no change. Exports were raised due to several large export sales of Soft Red Winter (SRW) wheat to China recently. SRW exports were raised 30 M bu to 175 M bu, the largest SRW exports since 2013/14.
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