This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
We got USDA’s April supply and demand estimates yesterday, Thursday April 10th at noon but not too many people were watching due to the pandemonium in the outside markets that is occupying everyone’s attention. The ag markets have become more insulated from the outside markets in the last few months due to the institutional money that has been pulled out of the ag space and that has been on full display this week. Another reason the ag markets are more insulated from outside markets is that it is impossible to interpret every move and every headline. Similar to watching wheat trade through the Russian invasion, the grains and oilseeds have had to grow numb to individual headlines. There are so many headlines coming out everyday that could have dramatic long term influences or might be completely reversed within the hour. In short, there is just way too much noise to know what is real and what is noise so the market has to tune most of it out. At the end of the day, the ag markets have to trade the supply and demand. Corn is tight in the US and the world. Currently the US is the only supplier that has corn available. Brazil will not have their second crop corn available at the ports until probably August and Ukraine is running on fumes. Soybeans have more of a cushion but also face the possibility of growing demand due to biofuels. That is why corn and soybeans have been able to rally despite all the craziness going on in the world. Now to the USDA report.
The April report is not typically a market moving one since we do not get a look at the new crop balance sheets yet. USDA does make adjustments to the old crop carryout using the stocks data we got at the end of March but that is not typically earth shattering. USDA did finally increase corn exports by 100 million bushels but lowered feed usage by 25 million that partially offset. That dropped ending stocks by 75 million bushels to 1.465 billion bushels. That was 40 million bushels below the trade expectations. On soybeans, USDA raised domestic crush by 10 million bushels but also raised imports by 5. That reduced carryout by 5 million bushels when the market expected a very small increase from the last report. For wheat, USDA raised imports and reduced exports which raised carryout by 27 million bushels. That was 23 million bushels higher than what the market was expecting. USDA made no changes to their South American production estimates and only very minor changes to the world carryouts.
The market is going to go back to watching weather and geopolitical developments. April weather makes yield in Brazil and the forecasts going forward are mixed. We are planting in the US now so the market will also be watching planting progress closely and then the weather in the US as we move through the growing season. Markets are growing numb to headlines but will still react to headlines that have direct impacts on grain trade.