by allendale
Corn:
Supply/Demand: The only change made to USDA’s balance sheet was a 25 million bushel increase for exports. This certainly fits with our viewpoint as we were already ahead of USDA’s February 10 expectation even before Ukraine problems developed. Now, with the US picking up some of that business that would normally go to Ukraine, you can make a good argument for higher exports. Ending stocks were lowered from 1.481 billion to 1.456. USDA left the corn for ethanol and feed/residual numbers unchanged. Much of the grain trade, and certainly Allendale, warns not to get too bulled up on today’s report. USDA’s feed/residual numbers are far too optimistic with their current estimate implying a sharp 22% increase over last year. We expect that optimism to be corrected on the April report.
World Numbers: USDA chose to leave both their Brazil and Argentina corn production estimates unchanged at 70 million tonnes and 24 mt respectively. World ending stocks were raised from 157.3 mt to 158.5. This is still an increase over last year’s 135.
Price Expectations: Today’s ending stock number implies $4.65 prices. The market is holding additional premium due to the Ukraine situation. The next piece of news ahead will be the March 31 Prospective Plantings and quarterly Grain Stocks reports. Allendale’s official bullish upside target was filled last week. We are now neutral and preparing for a move to $3.50 for the December contract after planting/development.
Soybeans:
Supply/Demand: Ending stocks were lowered slightly, from 150 million bushels to 145. While USDA did increase exports by 20 million bushels, that was partially offset by a 10 million decline for domestic crush and a 5 million increase for imports. The trade will now get concerned that USDA may manage ending stocks like last year. During that time ending stocks were left unchanged from February through September.
World Numbers: The decline posted for Brazil soybean production, from 90 million tonnes down to 88.5, may not have been enough for bullish expectations. Argentina production was left unchanged at 54 mt. World soybean stocks declined from 73.0 last month to now 70.6. This is still an increase from last year’s 58.
Price Expectations: Our bullish price target for old crop soybeans was filled weeks ago. There is just a little left to fill our $12.15 target for the November. As the trade will begin debating soybean plantings in earnest now, we expect sharply lower prices after planting. We feel USDA’s Ag Forum estimates, released in February at +3 million, to be sharply increased after this month’s survey. Our downside target is $9.25 for November.
Wheat:
Supply/Demand: USDA made no changes to the wheat balance sheet. The trade was expecting them to increase their stock estimate from 558 million bushels up to 570. We are currently behind USDA’s export sales estimate.
World Numbers: Ending stocks were raised slightly, from 183.7 million tonnes to 183.8. USDA raised their Australia production estimate from 26.5 mt to 27.0.
Price Expectations: Our bullish upside targets were filled last week. After planting, our eventual downside targets are $5.26 and $5.07 for July and December Chicago futures.
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