Newsom projects bullish corn, neutral soybeans and wheat from February WASDE
DTN Senior Analyst Darin Newsom called USDA’s Feb. 8 World Supply and Demand Estimates (WASDE) numbers mostly neutral, with some possibility of a bullish market for corn, commenting that South America production was tapped as the primary focus for the report.
“We can see demand shifts domestically that could trump what we see in South America’s production numbers,” he said, commenting on the overall lack of major changes in the report. “These numbers are interesting.”
“Our outlook is maybe a little bit bullish for corn and mostly neutral for soybeans,” Newsom summarized.
Overall, Newsom said, “It’s hard to be bullish with these numbers for overall soybeans. Among the larger players, there wasn’t much change in supply.”
Newsom overviewed world production numbers, mentioning speculators focused on a number of factors, but he stressed, “We’ve got quite a bit of time yet before we know what’s actually in the field.”
Argentina was a prime focus for the report, and soybean production for the country was slightly above the January report. Coupled with Brazil’s decrease, Newsom pointed to 166.8 million metric tons of production, which stays level.
“There was some chatter before the release, and everyone seemed to be ignoring the fact that there wasn’t going to be much of a change,” he said. “We’re down about 7 million metric tons from 2017, which was expected.”
Demand for soybeans becomes more interesting.
“China’s expectation for imports did not change from January,” Newsom said, noting the question is, where will they get that product from? “U.S. projected exports to drop by 1.5 million metric tons. “Who will fill those shoes as U.S. demand backs off? Brazil’s exports went up 2 million metric tons, offsetting the decrease from U.S. production.”
Reports that Brazil is shipping record numbers of soybeans and China is importing record numbers seem to be confirmed.
“This is also at a time when the U.S. dollar index is tending to stabilize,” Newsom said. “We could be looking at long-term changes in direction, which could put more pressure on further sales of U.S. soybeans.”
While this is no surprise, Newsom said the trend is alarming because of the amount of U.S. soybeans on hand.
Corn supply and demand show large supplies of 1,271 million metric tons. Ending stocks dropped 203.1 million metric tons, both of which are down from January 2018 forecasts and markedly down from 2017.
For corn, Brazil’s corn crop came in slightly above expectations, but level with the January expectation. Argentina also came in slightly below January estimates.
“Remember, this is not the final number. This is just the latest guess,” he said. “Overall, this is probably a little bit bullish for world supply and demand for corn.”
Changes in Brazil and Argentina’s production open the door for U.S. to enter the market, to the tune of 3 million metric tons.
“This is solid gain in projected exports of corn,” Newsom explained, asking whether or not the increase is feasible.
Chinese, Mexican and Japanese import forecasts have remained static, which offsets the fact that the U.S. export forecast is up.
“The door is open for the U.S. to move more corn.”
Wheat for 2017 was remarkably unchanged, leading to a primary focus on South America crops.
World wheat stocks are “ridiculously high,” according to Newsom.
Overall, corn is bullish, soybeans neutral and wheat numbers are neutral to bearish, according to Newsom.
Saige Albert is managing editor of the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.