May 7 / Alef Dias and Thais Italiani

Pre-WASDE Monthly Report - 2024 05 07

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"Comments about the perspectives for USDA's report"

Soybeans: bets are on global stocks rebuilding

Figure 1: US Soybean S&D (M bu)

Sentiment: Bearish
May is beginning and with it the market is awaiting the first WASDE reading for the 24/25 new crop on Friday (10).

Agents are betting on a scenario of more comfortable stocks in the US, but the foundations for this reading are fragile. Basically, the boost comes not only from a larger crop, but most likely from a lower demand reading (exports). And here's a caveat: week-on-week exports are indeed below the USDA's projection, but this reading was recently updated in April’s WASDE.

As a result, our understanding is that the crop will open with a larger supply (in line with the planting intention data) and demand that is very consistent with the February Agricultural Outlook, resulting in a slightly more comfortable ending stocks than in the 23/24 cycle.

Looking into the global picture, the tone is also one of restocking, adding elements for the CBOT bears.

Corn: new crop figures in the US tends to be conservative

Figure 2: US Corn S&D (M bu)

Sentiment: Bullish
For corn, the average market estimate indicates lower production in the US when compared to the February Agricultural Outlook reading. However, this is very much already priced in Chicago due to the update of planting intentions at the end of March, as we have reinforced, signaling a production potential of 14,881 mbu.

It's too early to make any adjustments to yields (there are still no updates on crop conditions and the weather pattern hasn't been too far from what is expected for this season), reinforcing the USDA's own trend reading.

As for the demand lines, the May reading is usually based on the Agricultural Outlook's statistical trendline.

About the global balance, agents are estimating an increase in ending stocks for 24/25 to 319M mt, compared to 318.3M mt in the current cycle, 23/24.

Wheat: no major changes for 24/25

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

Sentiment: Bullish
In wheat, the market expects a 1M mt cut in global stocks in the 23/24 harvest, a cut that should come from the demand side. The USDA has been constantly adjusting Ukraine's ending stocks, given the country's strong export pace in recent months, and looking at the carryover stocks from the pre-war crops, the country could still contribute around 0.8M mt to the global flow.

Looking at the 24/25 season, average market estimates point to practically the same ending stocks as the previous crop. This shows that the recovery in production expected in the US, Canada and especially Australia (due to the transition from El Niño to La Niña) should compensate for the smaller harvests in the EU, Ukraine and - possibly - Russia.

WASDE Commentary — Grains

Written by Alef Dias

Written by Thais Italiani


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