Apr 10 / Alef Dias

Pre-WASDE Monthly Report - 2024 04 10

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"Comments about the perspectives for USDA's report"

Soybeans: Bearish adjustments on the way

Figure 1: Brazil Soybean – Production (M ton)

Sentiment: Bearish

US Soybean exports during the 2023/24 period have experienced an 18% decline compared to the previous year, falling short of USDA’s predicted pace. Compounding this bearish outlook, latest stock report revealed soybean stocks totaling 1.845B bu as of March 1, exceeding expectations. Market estimates no changes to US’ ending stocks, so there’s room for a bearish surprise here.

In South America, market anticipates the USDA to revise down its production estimate for Brazil from 155M mt to 152.8M mt. Given the prevalence of lower estimates, it would be reasonable to expect at least this level of reduction from the USDA. Brazil's Conab, on the other hand, forecasts soybean production at 146.9M mt and will provide its own update tomorrow morning – so USDA’s figures may be too far from local figures.

Regarding Argentina, market expects the USDA to maintain its production estimate at 50M mt, which is still double the size of last year's crop affected by drought and below Buenos Aires Exchange’s estimates (of 52.5 mt).

USDA's assessment of global soybean stocks is projected to decrease from 114.3M mt to 114M mt for the 2023/24 period, still marking the highest level in five years if these projections hold true.

Corn: cuts may provide additional bullishness

Figure 2: Brazil Corn – Production (M ton)

Sentiment: Bullish

USDA kept its projection of US ending corn stocks at 2.172B bu since February. However, there is a strong possibility that this estimate will be revised downward tomorrow. Corn exports for the 2023-24 period have surged by 33% compared to the previous year, while ethanol production has seen a 4.5% increase over the same period, both exceeding the USDA's initial forecasts.

Turning to Argentina, the Buenos Aires Grain Exchange has recently downgraded its production estimate to 52M ton, which is below USDA's earlier estimate of 56M mt. Market expects no changes to Argentina's corn production, so a bullish surprise may happen here.

Meanwhile, USDA is anticipated to revise down its forecast for Brazil's corn production from 124M mt to 123M mt – still way above Conab figures (112.8M mt) and most private estimates, so it may have limited impact on prices.

Overall, the USDA's projection for global ending corn stocks in 2023/24 is likely to be adjusted downward from 319.6M mt to 317.0M mt, still marking a five-year high.

Wheat: No major changes expected as market focus on 24/25

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

Sentiment: Neutral

As we enter the final two months of the 2023/24 period, US wheat export sales have nearly met USDA's forecast of 710M bu, already, with shipments expected to come close to that figure by the season's end.

While the USDA may keep its ending stocks estimate unchanged at 673M bu for 2023/24, the report indicating March 1 wheat stocks at 1.087B bu was 34 mb higher than trade expectations, signaling that demand hasn't been as robust as anticipated.

Market expects the USDA to adjust its estimate of U.S. ending stocks upward from 673 to 685M bu, marking the highest level in three years. While traders are currently more focused on assessing prospects for 2024/25 wheat production, the USDA won't provide those estimates until the May WASDE report.

USDA's projection of 258.8M mt for global ending wheat stocks is anticipated to be increased to 260M mt. Even though there’s been weak demand signs, Ukraine exports will likely be increased, leading to lower ending stocks in the country and reducing chances of an upward adjustment.

Charts Legend

WASDE Commentary — Grains

Written by Alef Dias
alef.dias@hedgepointglobal.com

Reviewed by Thais Italiani 
thais.italiani@hedgepointglobal.com
www.hedgepointglobal.com

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