Brooks Schaffer Market Report for Friday April 12

This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.

USDA released the April WASDE report yesterday, Thursday April 11th at noon. The April report is not usually a big market mover and this was no exception. USDA does not release new crop balance sheets in April or make adjustments to old crop size. They only adjust the demand side of the balance sheet and update their South American production estimates. USDA made only very minor adjustments to the US balance sheet and almost no changes to South American estimates.

On corn, USDA raised feed and ethanol usage by 25 million bushels each taking 50 million bushels off the corn carryout bringing it to 2.122 billion bushels compared to their March estimate of 2.172 bb and market expectations of 2.102 bb. Even using the new ethanol estimate, US ethanol grind remains at a pace to use 98 million more bushels than USDA is estimating so as long as the pace remains strong there is still more room to increase demand. Exports also remain 50 million bushels above the pace needed to achieve USDA’s estimate so the old crop corn balance sheet should trend tighter. The lower prices are doing their job to increase demand.

On US soybeans, USDA dropped exports by 20 million bushels and made some other minor tweaks to add 25 million bushels to US carryout. That puts US carryout at 340 million bushels compared to their March estimate of 315 mb and market expectations of 319 mb. That looks like a bearish surprise but the market actually rallied off the lows after getting the data. The recent selloff has this already priced in and also I think the market knows that USDA is going to have to raise domestic demand to offset some of the lost exports. Domestic demand remains well above the pace needed to achieve USDA’s target. The market is looking for increases in domestic demand on future reports.

USDA’s Brazilian bean production estimate remains almost comically above everyone else in the industry. Most had expected at least some adjustment, even a small one but USDA left it unchanged from their March estimate at 155 million metric tons. This is is 9 mmt (or 330 mb) above CONAB (Brazilian equivalent of USDA)! USDA has been very conservative making adjustments to South American production but the divide between USDA and almost all other analysts seems especially large this year. They left Argentina bean production unchanged. The two countries together produced 187 mmt last year with a historic drought in Argentina. Production has rebounded in Argentina this year and even using CONAB’s lower estimate, the two countries together should be somewhere around 196 mmt this year. This is keeping some selling pressure on beans. USDA did drop Argentina corn production by 1 mmt and left Brazil unchanged. This is understandable as it is April weather that makes the second crop corn yields.

The May USDA update will be one of the biggest reports of the year so far. It will be our first look at the new crop balance sheets for the US. We will also have a better idea of planting weather and how the Brazilian corn crop finishes. We will also have some idea of how the growing season weather will start. We will have another month of inflation data from the Fed to see if inflation continues to heat up. That report comes out on May 10th at noon. Until we get closer, I expect the market to continue to drift within the same ranges we have been trading.