On Friday April 9th the USDA released their April WASDE Report. Several changes were recorded on the domestic balance sheets, but overall no major surprises were reported. Export demand for corn was increased 75 million bushels to 2.675 billion. Increases of 50 million bushels were made to feed usage and 25 million in ethanol demand. The net decrease in corn carryout was the largest March to April decrease since 2008 at 150 million bushels. The USDA is now forecasting carryout at 1.502 billion bushels.
Several changes were also made to the soybean balance sheets. Export demand was increased by 30 million bushels to 2.280 billion. Reductions were made to crush and seed/residual demand of 10 million and 20 million bushels respectively. The alterations made offset leaving carryout unchanged from the prior month at 120 million bushels.
The USDA updated their South American production estimates in the release as well. Argentine corn production was reduced ¢ MMT (million metric tons) to 47 MMT. Brazil’s corn estimate was left unchanged at 109 MMT. Argentina’s soybean estimate was left unchanged at 47.5 MMT. The most notable change and the largest surprise in the entire report was the increase made to Brazil’s expected soybean production. The USDA increased their estimate 2 MMT to 136 MMT, while pre-report estimates leaned for mostly unchanged. As a result, profit taking developed pressuring values into Friday’s close and early in the week.
Futures values gained momentum mid-week as global weather concerns resurfaced. Forecasts for extended dryness across the southern and central regions of Brazil prompted the addition of risk premium. The size of the second corn crop remains in limbo and private estimates remain quite variable. It is estimated that 40 to 45 percent of the safrinha crop is experiencing some level of moisture stress. The Brazilian firm IMEA, cut forecasts for Mato Grosso’s corn crop from 36.27 to 34.98 MMT. Mato Grosso is Brazil’s top producing area for corn and soybeans.
The drought across the Northern Plains and Canadian Prairies is also a large concern in trade. Sources stated that the past seven-month period has been the driest on record across the many areas in the Northern Plains. Recent dust storms have highlighted the extent of the situation, bringing planting decisions into question. If the dryness persist, it’s likely that producers will switch to crops with a wider planting window such as soybeans at the expense of wheat and corn.
Planting progress for corn was reported at 4 percent complete as of Sunday, April 11th. This is comparable to the 5 year average and last year’s pace of 3 percent. While the pace is not much of a factor at this time, the cooler forecasts extending into next week will limit planting activity for much of the Corn Belt. If accurate, planting could fall below the normal pace. Typically, 25 percent of the corn crop is in the ground by the end of April.
Fund traders took the weather concerns and the break in prices following the USDA report as an opportunity for additional buying. Estimates mid-week had funds long 445,000 corn contracts, which would be a new record. New contract highs were made during the week in both the spot and new crop corn contracts. Values traded to the highest level since July of 2013. Interestingly, stocks-to-use levels in 2013 were much tighter than today. Today’s balance sheets are estimated at 9.2 percent stocks-to-use versus 6.5 percent in 2013.
For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at firstname.lastname@example.org. The opinions and views expressed in this commentary are solely those of Mick Hoover. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.
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