Feb 8 / Alef Dias and Thais Italiani

Post-WASDE Monthly Report - 2024 02 08

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"Results of USDA's February report"

Soybeans: Brazil in the spotlight and the divergence between agencies

Figure 1: Brazil Soybean - Production (M ton)

The USDA, as usual, didn't make many changes to its US Supply and Demand estimate for February. Only exports were reduced due to two factors: the concerns over slow pace of shipments at US ports in January and the competition with Brazil.

Speaking of Brazil, the cut in the soybean production estimate happened as expected, but to a lesser extent. While agents on average pointed to a cut of 3M mt, the USDA was more conservative and reduced it by just 1M mt to 156M mt.

This movement, combined with Conab's update today, has increased the difference between the two readings. While the USDA expects the Brazilian crop to reach 156M mt, Conab is already working below 150M mt, with an estimate of 149.4M mt, a difference of 6.6M mt.

Corn: Brazil takes the spotlight

Figure 2: Brazil Corn - Production (M ton)

Fig. 3: EU wheat - Area, yield and production (M ha, mt/ha, M mt) 
Along the same lines as soybeans, the USDA made only marginal adjustments to the US corn balance. Consumption of corn for use in food, seeds, and industry was reduced, reflecting higher stocks. Exports remained unchanged, contrary to expectations.

Looking at South America, where supply is the center of attention at the moment, Argentina's crop estimate remained stable at 55M mt, while Brazil's was reduced from 127 to 124M mt. Although this was in line with market expectations, the fact that Conab has already lowered its crop projection further calls into question the US department’s estimate.

Conab projects Brazil's corn crop at 113.7M mt (down 3.9M mt vs January) and 10.3M mt below the USDA.

Wheat: more production with tighter stocks

Figure 3: World Wheat - Ending Stocks (M ton)

For wheat, it was a calm WASDE, but the changes were more bearish in general. Despite slightly tighter than expected world ending stocks, global production estimates actually increased month-on-month, with Argentina being the main upward adjustment (+0.5M mt - in line with local estimates).

The drop in ending stocks was led by higher demand in India, where the government continues to sell reserves to deal with inflation. The country's domestic use was raised by 1M mt. Trade flows leaned to the bearish side with a 2M mt increase in exports from Ukraine (which continues to have competitive prices due to high stocks). Argentina and Australia also had their export estimates increased.

Finally, US ending stocks were seen looser than expected, as food use was reduced by 10M bu due to lower wheat milling, as indicated in the NASS Flour Milling Products report released on February 1.

Charts Legend

WASDE Commentary — Grains

Written by Alef Dias
alef.dias@hedgepointglobal.com
Written by Thaís Italiani
thais.italiani@hedgepointglobal.com
www.hedgepointglobal.com

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