Chicago Market Reaction To USDA Report

10/02/14 -- Soycomplex: Beans closed lower as the USDA report failed to add anything bullish to the arena, coming in a little bit negative for soybeans. The USDA appear to have continued to adopt the same "line in the sand" ending stocks figure for US soybeans in the 2013/14 marketing year as the one that they stuck by throughout most of the second half of 2012/13 - 150 million bushels. The trade was expecting that the very strong export pace that we've seen in the early part of the season, combined with robust domestic demand would see last month's forecast 150 million bushels trimmed down closer to 140 million, but that was not the case. The USDA raised US soybean exports this season, but only slightly, to 1.51 billion bushels - and existing commitments are already higher than this at 1.58 billion. Brazil's crop was raised to a record 90 MMT, and Argentina's lowered to 54 MMT - both in line with expectations. World ending stocks were pegged a little bit higher than anticipated at 73 MMT. Whilst the USDA apparently remain confident that a fair proportion of the unshipped US soybean sales this season will bet cancelled, weekly export inspections came in at a robust 57 million bushels, or just over 1.5 MMT which is better than the expected 1.1-1.3 MMT and will further increase the percentage of US soybeans sold and already shipped from last week's 78%. In other news, AgRural estimated the Brazilian soybean crop at 88.8 MMT, but warned that a downgrade is possible if weather conditions don't improve by the end of the week. The crop was 12% harvested as of Friday, and 22% done in the top producing state of Mato Grosso, they said. CONAB come out tomorrow morning with their latest Brazilian crop estimate updates. CNGOIC estimated China’s Jan bean imports at 5.4 MMT versus record Dec imports of 7.4 MMT, although that's still up 11% from Jan 2013. They said that they expect China’s Feb bean imports to be 55% higher than a year ago. Mar 14 Soybeans closed at $13.25 1/2, down 6 cents; May 14 Soybeans closed at $13.12 1/4, down 5 1/4 cents,; Mar 14 Soybean Meal closed at $444.00, down $2.40; Mar 14 Soybean Oil closed at 38.73, up 17 points.

Corn: The corn market closed a cent or so lower, despite a bullish looking USDA report. They cut 2013/14 US corn ending stocks sharply, from the 1.631 billion bushels forecast last month and well below the expected 1.619 billion, to 1.481 billion. That sparked a rally, but after front month Mar 14 failed to break through the $4.50/bushel mark, reaching $4.49 before retreating, the market eventually fell back into negative territory. Brazil's corn crop was left unchanged at 70 MMT and Argentina's was cut from 25 MMT to 24 MMT - neither was a surprise. World ending stocks came in at 157.3 MMT, largely courtesy of the changes in the US, versus the 159.6 MMT expected. It will be interesting to see if CONAB downgrade their Brazilian corn production estimate tomorrow, in light of recent weather problems. Last month they were far ahead of the USDA, forecasting a total corn crop there of 78.97 MMT. The USDA attaché in China estimated their 2013/14 corn crop at 217.0 MMT, with consumption at 213 MMT, imports at 5 MMT and ending stocks at a whopping 76.5 MMT. Ukraine said that their grain exports are picking up again now that the weather has improved a little. They shipped out 640 TMT last week (to Feb 7) and have a further 1.3 MMT at the ports waiting to load. The vast majority of that will be corn. Greek importers bought 6,000 MT of corn from Russia for March shipment. The weather has improved no end in Argentina, but it may have come too late for all but late planted corn. "Argentina received exceptionally heavy rainfall the past 2-3 weeks from a stalled trough of low pressure. Recurring showers helped replenish parched fields following severe drought previously. Four to 8 inches of rainfall accrued in the grain belt, the equivalent to a full-month’s allotment. Local farm reports however indicated corn was already irreversibly damaged by severe drought. Most corn had already pollinated in a period of intense heat and moisture stress late in December and early January. Kernels not pollinated due to drought stress would never develop into grain," said Martell Crop Projections. Weekly US corn export inspections came in at 27.37 million bushels versus the expected 19-24 million. Mar 14 Corn closed at $4.43, down 1 1/4 cents; May 14 Corn closed at $4.48 3/4, down 1 1/4 cents.

Wheat: The wheat market closed sharply higher as the USDA cut US 2013/14 wheat ending stocks much more sharply than the trade expected, down from the 608 million bushels forecast last month to 558 million - and well below the anticipated 603 million. World wheat stocks came in around 1.2 MMT below expectations at 183.7 MMT - although that's still a more than ample total. Fund money was still sitting on a sizable wheat short heading into this report, even if that had been trimmed somewhat of late. Today's numbers likely prompted some further purchases, with funds said to have probably been net buyers of around 6,000 Chicago wheat contracts on the day. The lower than anticipated US stocks number was largely due to increased exports. "Exports are projected 50 million bushels higher as reduced competition from Argentina and strong sales and shipments further boost prospects for U.S. wheat in world trade. A reduction in expected exports from Australia during the July-June world trade year also raises prospects for (increased) 2013/14 U.S. shipments," the USDA said. In other news, Egypt’s supply minister said that the country has enough wheat supplies to last until mid-June. India's PEC tendered to sell 70,000 MT of wheat for Feb-March shipment. Iran is said to have bought at least 400 TMT, and possibly as much as 600 TMT, of wheat in the past week as Western sanctions have eased. The most likely origin is said to be German and Russian. The Russians are picking up more export business due to the weakness of their domestic currency. USDA attaché in Australia estimated the 2013/14 wheat crop at 26.2 MMT, up 17%, with barley production at 8.6 MMT, up 15%. Despite the rise in wheat output exports will fall 13% to 18.6 MMT, they forecast. Has US wheat finally turned a corner, having been stuck in a downtrend for 18 months? Only time will tell. US wheat export inspections came in at 16.4 million bushels, a little above trade expectations of 10-15 million. Mar 14 CBOT Wheat closed at $5.84 3/4, up 7 1/4 cents; Mar 14 KCBT Wheat closed at $6.62 3/4, up 13 1/2 cents; Mar 14 MGEX Wheat closed at $6.51 1/2, up 12 1/4 cents.