This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
The USDA February report is typically a non-event as there are not typically any big changes made. USDA does not make changes to the US crop size and typically only minor changes to the demand side. South American production can be the wild card but USDA has been so conservative on reducing estimates, the market was not expecting much. Yesterday’s report did hold a few minor surprises but nothing big enough to dramatically change the direction. The biggest surprise was probably on the bean balance sheet where USDA dropped exports by 35 million bushels and raised carryout by the same amount. That raises US ending stocks from 280 million bushels on the Jan report to 315 million bushels on yesterday’s estimate. That is not burdensome, but adds a margin for error that we did not have. Many people had expected an adjustment to exports as we fall further behind of the seasonal pace to meet USDA’s previous estimate, but they also expected an increase in domestic crush to partially offset. We continue to see very robust domestic demand with new plants and plant expansions coming online. Crush margins have been trimmed over the last few weeks but we are still looking for strong domestic demand growth.
On corn, USDA dropped food, seed and industrial use by 10 million bushels but this does not change the carryout by a consequential amount. We remain ahead of pace on ethanol demand after we saw a big rebound from the weather related plant shutdowns two weeks ago. Exports remain ahead of the seasonal pace needed to meet USDA’s target despite cheaper options for many importers. Mexico is by far the biggest buyer of US corn and that lead has grown this year. Many analysts look for feed demand to also grow as cheaper corn encourages heavier animal weights.
For wheat, USDA dropped food use by 10 million bushels and raised carryout by the same amount. This is a small change to carryout but wheat will continue to be influenced by geopolitical forces. The market saw weakness Thursday before the report on rumors of Russia lowering export taxes to be more competitive. Ukraine has been able to reach a higher export pace than before the war started. The market prices hide how much risk there still is in that region. If Russia or Ukraine get desperate enough, they could hit grain shipments and change everything in an instant.
CONAB, Brazilian equivalent of USDA, released their updated estimates Thursday morning before USDA. CONAB made more significant cuts to their estimates than USDA did. CONAB estimated corn production at 113.7 mmt compared to 117.6 mmt last month and USDA’s estimate at 127 mmt. On soybeans, CONAB estimated production at 149.4 mmt vs last month at 155.27 mmt compared to USDA at 156 mmt. There are still questions about the size of Brazil’s soybean crop as harvest progresses. The second crop corn still has a lot of weather to trade as well.