How to describe in the most synthetic way this infamous USDA WASDE of May? “More bullish than expected on Soybeans dragged the whole complex up”. It seems to be as simple as this indeed. Soybeans finished up in excess of +50 cents per bushels (this is +5% roughly), Corn finished up around +10 cents per bushel and wheat was lagging but following at +5 cents per bushels. Once again a big swing on funds, they bought 29,000 Soybeans, 18,000 Corn and 3,000 Wheat.  MATIF rebounded much less but closed also in the green.

Wheat Old Crop

Here is a heatmap of the movements from last USDA WASDE report to current.

Wheat Old

It’s becoming heavier again… on the US side, slight marginal surprise, an increase of 0.14MT for the exports, for sure we’ll watch out export inspections, for the next 4 weeks, wheat sipped need to reach 2.33MT. It will for sure be a close call but with rising price it can trigger a bit of panic purchase. However, this is completely offset by lower consumption. US stocks are marginally higher 50kt. Main movement is really in North Africa and India (ending stocks respectively up +2.16MT and +1.31MT) offset by FSU (-1.71MT). On more minor moves, higher ending stocks in Argentina (+0.68MT) and Australia (+0.50MT) is partially offset by Canada (-0.5MT) and EU (-0.30MT). So despite the higher number, there’s nothing to get really excited about, but certainly tough to see bullishness here.

Wheat New Crop

Here is a heatmap of the movements, from last USDA WASDE old crop estimate to last (and first) USDA WASDE new crop estimate.

Wheat New

Big increase of world ending stocks! +14.43MT! They will reach 257.34MT. The ratio to use would become 36.1%, it’s now clearer, there won’t be any kind of wheat shortage in wheat. Production will be lower, -7.06MT to 726.99MT but one cannot expect a record every year! Main production decrease in in EU (-3.51MT), North Africa (-5.21MT) and obviously Ukraine (-3.27MT). This is partially offset by India (+1.47MT) and Argentina (+3.20MT). Use is expected to decrease, mainly in EU (-2.5MT). In the US, good yields (46.7 bushels per acre, +7.11% versus old crop), will limit the production cut to -1.47MT. Not too bad for the worst surfaces since a few years!

So heavy is becoming heavier and there is no concern just yet for the next season. A lot can happen during the last few weeks in the northern hemisphere but it seems that the wheat crop will be very decent.

Corn Old Crop

Here is a heatmap of the movements from last USDA WASDE report to current.

Corn Old

The world ending stocks have been cut slightly more than expected by -1.04MT to 207.87MT. Is that massively bullish as such, well, there’s some buffer and ending stocks are still 21.5% of the use. In the US, more export are expected (+1.91MT), here also, we’ll closely monitor export inspections, corn will need to be shipped at a very good pace, ending stocks are down -1.5MT as a consequence. On the production side, there was -1MT cut in Argentina and -3MT in Brazil, this is confirming the second Brazilian crop struggles. USDA barely move their balance sheet, estimating it’s surplus that won’t be exported. USDA expect a decreased in non-feed use to offset these hits. So this is slightly bullish but there’s a lot of buffer, world was well supplied in corn last season.

Corn New Crop

Here is a heatmap of the movements, from last USDA WASDE old crop estimate to last (and first) USDA WASDE new crop estimate.

Corn New

On the big picture, tough to find some global bullishness. World production is seen above 1 billion tones, to 1,011.07MT, this would be an increase of +42.21MT from the old crop. That’s pretty. However ending stocks will be down -0.83MT to 207.04MT, 20.5% of the use, this is still very comfortable. So with a big increase of production but no stock movements, there must be some big hit somewhere creating a bit of local bullishness. Not in the US: Ending stocks are higher 8.89MT, production is seen up +21.05MT (with very decent yield of 168 bushels per acre, marginally down from year) and this will be offset by higher use (+9.15MT) and higher exports (+4.44MT). It better, else the US balance sheet will become incredibly heavy. However, this is very early to assess accurately the next corn crop and a lot can happen during the summer. On the world demand side, USDA expect an increase of 22.61MT of the feed use a +20.43MT of the non-feed use. So basically, higher production is supposed to trigger more use. If price are going down sharply, this could be the case indeed. Also noticeable on the production side, Argentine is seen at +7MT, South Africa +6.5MT, Ukraine +2.67MT and China -6.58MT.

For sure this will evolve and the may report, although being a market mover, is not the most accurate, for corn and soybeans this is still very early to have a decent estimate, not even the whole US corn is planted.

Soybeans Old Crop

Here is a heatmap of the movements from last USDA WASDE report to current.

Bean Old

So soybeans were clearly the market mover. Market was expecting a cut of production. And this is done. Argentina is pegged at 56.5MT (-2.5MT) which can be seen as a bit optimistic actually. Brazil is pegged at 99MT, -1MT, losing the 3 digits was expected. Total world production is now seen at 315.86MT, -4.29MT and ending stocks are down to 74.25MT (-4.77MT) but are still 23.3% of the use. So this is a big cut for old crop in May and more could still come but world remains very well supplied on soybeans old crop.

Soybeans New Crop

Here is a heatmap of the movements, from last USDA WASDE old crop estimate to last (and first) USDA WASDE new crop estimate.

Bean New

The market rebounded on the double hammer. The problem is not the cut of old crop production, it’s also that new crop is getting  lower ending stocks. Double hammer, market got a fright. Ending stocks will be down -6.04MT to 68.21MT, which is still 20.8% of the use so this must be put into perspective… There is still a long way to go before edamame, tofu and soybean oil become as expensive as saffron… Production is seen higher +8.34MT to 324.45MT. US is taking a hit of -3.51MT on lower than last year yields (46.7 bushels per acre versus 48 bushels per acre) but Brazil is leading the way of production increase (+4MT). Main consumption increase is on the China side, crush is seen +5.2MT.

Conclusion on the USDA WASDE

Usually May is a market mover and it has been the case. However, it is not necessarily the most accurate on the new crop! It is still very early so a lot ca happen. The level of certainty on wheat is pretty good though as northern hemisphere is approaching the harvest. Market reacted to the soybeans data and the whole complex has been dragged up, wiping up the remaining shorts. Also, the market might have been a bit too much US focused there and reacted on the lower new crop production estimates for soybeans. Seasonality might sustain a bit the rebound on Soybeans but what about Corn and Wheat? Do they really deserve to be pushed higher? They have followed Soybeans as much as they could have that being said. One of the takeaway on corn is a very good yield expectations… But if it’s not happening, this might hurt the world balance sheet, so seasonality is the key.

*   *   *

Night session is a bit groggy. Generally up (nothing more than +0.3%), market is still digesting the data. MATIF is trading higher also but for a couple of ticks.

In France, France Agrimer left unchanged the corn ending stocks to 2.4MT, while they cut them for barley to 0.937MT from 1.1M. Finally in soft wheat, stocks are seen down to 3.9MT from 5.45MT. They have cut the delivered crop by 1MT, so the last month leak on the market was absolutely true and it’s said French regulator AMF is beginning to be interested in this as the meeting France Agrimer is doing with French biggest operators 24 hours before the release of the data is seen as insider trading by participants that are not lucky enough to be invited. Also, exports have been raised by +0.5MT.

In Morocco, the Agriculture Minister confirmed this crop will be bad: total grains will be 3.35MT versus 11MT the year before, dry weather is to blame. Algeria’s OAIC has booked some wheat most probably around $185 CNF but no report or leak has surfaced just yet. There’s no official result published. Taiwan Flour mills bought 109.965T of US wheat. Japan is seeking 49,140T of feed wheat and barley.

On Freight, Baltic Dry Index BADI keeps sinking, driven by lower Capesize demand. BADI is now back below 600 to 594, +24% YTD but -17% since the recent highs. Oil is trading down, NYMEX Crude has a $44 handle and ICE Brent a $45 handle. Gold is up, back to close to $1,275 per ounce.

Still no significant move on the EURUSD. Seems like it wants to range and waits for the next fundamental reason for diverting.

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