Mar 7 / Alef Dias and Pedro Schicchi

Pre-WASDE Monthly Report - 2024 03 07

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"Comments about the perspectives for USDA's report"

Soybeans: Focus remains on Brazilian production

Figure 1: Brazil Soybean – Production (M ton)

Sentiment: Neutral/Bullish

March has come and another WASDE is just around the corner. This month, with the harvest advancing in South America, the market will be expecting changes in USDA’s estimates for the region.

This is especially true for Brazil, where the harvest is already halfway done, and the agency’s current estimate is a good deal bigger than other local forecasters. The median expectation is a 3M ton cut, which would still maintain USDA’s number on the higher end of the spectrum.

As for Argentina, agents are expecting no changes in production. However, crops in the country are at their most sensitive stages and crop conditions registered a decline recently. This mismatch between expectations and conditions makes for an interesting combination for surprises.

Corn: cuts also expected in Brazil, but smaller than on soybeans

Figure 2: Brazil Corn – Production (M ton)

Sentiment: Neutral/Bearish

As always, the situation for corn is similar but not quite. First, the similarities. The market’s focus should also be developing crops in South America, which does not mean interesting numbers can’t appear elsewhere as well.

The scenario in Argentina is analogous to soybeans as well. The market also, on average, expects no change in production, and crop conditions have declined through February.

The difference is in Brazil. The country’s main crop (winter) is being planted at the moment, which provides a lot more uncertainty to the crop output. Also, for this reason, there’s much less consensus amongst other forecasters. As such, USDA’s current estimate does not stand out as much as for BR soybeans. Market’s median estimate still points toward a cut, but of smaller magnitude.

Wheat: another WASDE without major changes

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

Sentiment: Neutral/Bearish

The March WASDE will be the penultimate report without estimates for the next harvest (24/25), and the harvest in all the main producers has already been completed. As a result, the market expects little change in global and US ending stocks.

Despite a scenario with no major changes expected, some figures are likely to change marginally. The USDA may increase its estimate of Australian production to 23/24 from 25.5M mt due to increased rainfall in the final stages of the harvest. The Australian Agriculture Ministry raised its estimate by 0.5M mt to 26M mt on Monday.

Russia's wheat production forecast for the 23/24 harvest may also be revised upwards, as USDA's current figure of 91M mt is below the 92.8M mt forecast by Russian agricultural consultancy Sovecon. Ukrainian exports may also be adjusted upwards, given that the country's maritime wheat exports remain at their highest levels in five years.

Charts Legend

WASDE Commentary — Grains

Written by Alef Dias
alef.dias@hedgepointglobal.com

Written by Pedro Schicchi
Reviewed by Victor Arduin
victor.arduin@hedgepointglobal.com
www.hedgepointglobal.com

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