Chicago Soybeans Crash Following USDA Report

08/02/13 -- Soycomplex: Mar 13 Soybeans closed at USD14.52 1/2, down 34 1/4 cents; May 13 Soybeans closed at USD14.36 3/4, down 36 1/2 cents; Mar 13 Soybean Meal closed at USD422.40, down USD15.20; Mar 13 Soybean Oil closed at 51.43, down 42 points. For the week that puts the nearby months down 21 3/4 cents on beans, down USD5.80 on meal and 156 points lower on oil. The market reaction to the USDA report was probably more interesting than the WASDE numbers themselves. The USDA lowered US soybean ending stocks for 2012/13 by a bit more than anticipated to a very tight 125 million bushels. It is important to note that this came by virtue of an increased US crush. Exports were left completely unchanged from last month at 36.6 MMT, despite the fact that 93.5% of that target is either already sold and/or shipped with seven months still remaining in the 2012/13 marketing year. Brazil's crop was raised 1 MMT to 83.5 MMT and Argentina's was lowered by a similar amount to 53.0 MMT. World ending stocks were placed at 60.1 MMT versus 59.5 MMT last month. Essentially these extra stocks will all be in Brazil. The market reaction seemed to be one of "buy the rumour, sell the fact" as heavy fund selling drove soybean prices around 20 cents lower in the last hour of trade. Estimates I've seen on the net volume sold today by the funds vary from 8-17,000 contracts. Given the size of the decline, the larger number looks the more likely. Yet fundamentally nothing has changed. Indeed, the USDA have not yet addressed the fact that US soybean exports are pouring out of the country at an unprecedented rate. Without large scale cancellations or deferral of old crop sales into new crop, ending stocks are likely to be far smaller than even today's number suggests - and that represents the tightest stocks/use ratio in almost 50 years. Meanwhile there are reports that a port strike in Brazil is planned for February 18th-19th over wages.

Corn: Mar 13 Corn closed at USD7.09, down 1 3/4 cents; May 13 Corn closed at USD7.08 3/4, down 3 1/4 cents. For the week as a whole that puts corn 27 cents lower. Net fund selling on corn on the day was estimated at 5-6,000 lots. The USDA raised US corn ending stocks by more than anticipated, up by 30 million bushels from last month to 632 million. That came courtesy of a 50 million bushel reduction in US corn exports and a 20 million increase in domestic feed usage. US corn exports in 2012/13 are now placed at 24 MMT, down 38% on last season's 38.4 MMT. America's loss in Brazil's gain, with their exports forecast 2 MMT higher this month at 24.5 MMT - they are now seen as the world's largest corn exporter in 2012/13 - bigger even than the US. If they so prove to be then it will be interesting to see how their infrastructure copes, especially given that the USDA is also predicting that they will export 38.4 MMT of soybeans as well in 2012/13. Brazil's corn crop was increased 1.5 MMT to 72.5 MMT versus the average trade guess of 71.1 MMT and marginally behind last year's record 73.0 MMT production. The Argentine corn crop wasn't dropped by as much as anticipated, only being lowered 1 MMT to 27.0 MMT. World ending stocks were raised more than expected to 118.0 MMT, with the majority of that likely to be in Brazil. Corn consumption in Europe was raised 2 MMT to 66 MMT, with imports also up 2 MMT to 10 MMT. China's corn consumption was raised 0.5 MMT to 208.5 MMT, and their imports were increased a similar amount to 2.5 MMT. Egypt and Mexico saw their import requirements lowered.

Wheat: Mar 13 CBOT Wheat closed at USD7.56 1/4, up 1/4 cent; Mar 13 KCBT Wheat closed at USD7.99 3/4, down 1 1/4 cents; Mar 13 MGEX Wheat closed at USD8.36 1/4, down 3 cents. For the week that places Chicago wheat 8 3/4 cents lower, with Kansas down 22 1/4 cents and Minneapolis falling 15 1/2 cents. The USDA lowered US wheat export potential, although only slightly, from 29.5 MMT to 29.0 MMT. There was a noticeable shift class in the exports, with HRW down 25 million bushels to 425 million and SRW up 25 million to 160 million. Given the recent subdued pace of US exports hitting this target looks ambitious, weekly volumes will have to move up a gear or two for the remainder of the season. There is still export competition out there, EU exports were raised 0.5 MMT to 18.5 MMT and so too were India's to 8.5 MMT. Brazil's wheat crop was cut 0.5 MMT to 4.3 MMT, although their imports were left unchanged. Increased domestic feed usage of wheat in the US saw ending stocks fall 25 million bushels to 691 million, contrary to trade expectations for a small increase to 728 million. World ending stocks were barely changed at 176.7 MMT, a little higher than the average trade guess of 175.5 MMT. Ukraine's 2012 wheat crop was raised from 15.5 MMT to 15.76 MMT, whilst Kazakhstan's was reduced from 10.5 MMT to 9.84 MMT.