Jun 11 / Alef Dias and Ignacio Espinola

Pre-WASDE Monthly Report - 2024 06 11

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"Comments about the perspectives for USDA's report"

Soybeans: USDA continues being conservative on the crop expectation

US Soybean Ending Stocks (M mt)

Fonte: USDA, Bloomberg, Hedgepoint

Sentiment: Bearish
June brings the second WASDE report for 24/25 new crop on next Wednesday, 12 June.

Expectations wise, the market is expecting a production number between 51-49 M mt for Argentina, with a previous WASDE number of 50 M mt which seems comfortable with the last news. On  the Brazil side, market’s gap goes between 149-154 M mt with a previous report estimate of 154 M mt which does look a little bit on the high side considering the damage that the challenging weather has done in many parts of Brazil.

Last news about Brazilian government trying to discount tax credits for certain industries could bring some fear into the Brazilian farmer, who could potentially slow his sales and reduce the investment for next crop as this treat could cut between 4 to 5% of their revenue. Luckly for them, the Brazilian congress needs to approve this within the next 4 months or leave everything as it is right now. If this could happen, we should have a bullish trend on prices that could benefit US as an origin, making their beans more competitive.

Finally, ending stocks wise, agents are expecting a range between 319-385  M mt for 23/24 crop and 398-492  M mt for 24/25 crop with current estimates of 340  M mt old crop and 445 M mt  new crop.

Considering this scenario, we will find ourselves in a comfortable scenario on the ending stocks, but we still need to keep an eye on further treats and changes like the tax credit discussion in Brazil

Corn: Adjustments to SAM crops are not as accurate as local numbers

Argentina Corn Production (M mt)

Fonte: USDA, Bloomberg, Hedgepoint
Sentiment: Bearish

Even though June WASDE report is not a major market mover as market looks forward to more meaningful month’s end reports, it does bring some clarity to some numbers.
For corn, the previous report was giving an estimation of 53MMt for Argentina while the latest local reports are showing numbers closer to 46-47 M mt  due to the chicharrita disease.

On the Brazilian side, the expectations report is expecting around 122 M mt, with a market range between 119-123 M mt. .
Finally, the report is not expected to bring major changes to US ending stocks, consequently not bringing major movements to the market.

Wheat: All eyes on Russia

 World Wheat - Ending Stocks (M mt)

Fonte: USDA, Bloomberg, Hedgepoint
Sentiment: Bullish

After a long winter and spring full of adverse weather challenges, the winter wheat harvest is getting underway across the Northern Hemisphere, and there will be quite a bit for traders to notice in Wednesday's report. Market’s median estimates point to a total US wheat production of 1882M bu in 2024/25, which is expected to result in 779.5M bu of U.S. ending wheat stocks in 2024/25, the highest in four years.

World estimates of wheat production will be more interesting this time around after issues of frost and excess moisture in Europe, coupled with freeze damage in Russia and Ukraine, followed by hot and dry conditions that are still stressing crops around the Black Sea.

Last month, USDA estimated Russia's wheat production at 88M mt. This past week, we lowered our estimates of Russia's wheat production to 79.2M mt, with a risk of lower estimates ahead. Ukrainian wheat projections might also be lowered due to weather issues, with some areas of the country suffering from the driest May, while others received adequate amounts of rain. The USDA estimated 2024/25 Ukrainian production at 21 M mt, versus the 19-20 M mt by local agencies.

Global ending stocks in 2024/25 are expected to total 251 M mt, down by 2.6 M mt from the forecast in the May WASDE report.

WASDE Commentary — Grains

Written by Alef Dias

Written by Ignacio Espinola


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