Data from three key U.S. Department of Agriculture reports in the past two-and-a-half weeks provided few surprises and mixed signals to the market, at least compared with expectations. One point seems certain: There will be no shortage of wheat, corn and soybeans the remainder of this year or next, barring a major weather disaster, which so far isn’t in the forecast. In fact, weather conditions have improved significantly for winter wheat.
• The U.S.D.A. forecast for 2017 soybean plantings was above the average of trade expectations;
• Corn was below, and wheat was slightly below;
• The U.S.D.A. estimates of March 1 soybean, corn and wheat stocks all were above average expectations; and
• The U.S.D.A. 2017 carryover forecasts for soybeans and corn issued last week were below the average trade estimate while wheat was above. At the same time, the U.S.D.A. raised 2016-17 global ending stock forecasts for corn, wheat and soybeans last week were below the average trade estimate while wheat was above. At the same time, the U.S.D.A. raised 2016-17 global ending stock forecasts for corn, wheat and soybeans on April 11 (all record high), along with higher forecasts for Brazil (record high) and Argentine soybean and corn production (corn record high for both).
Perhaps the greatest surprise in the March 31 Prospective Plantings report was the higher-than-expected 2017 soybean planting number. While the trade was expecting a record-high forecast, based in part on the U.S.D.A.’s Agricultural Outlook Forum record-high projection in February, and on a continued favorable soybean/corn profitability ratio, the March 31 forecast at 89.5 million acres still was above the average of trade expectations. Despite the record-high planting indication, U.S. soybean production in 2017 is expected to be below last year’s record-high outturn as 2016 record-high yields likely will not be replicated as growing season weather forecasts for warmer, drier conditions across key production areas may trim yields.
The other data, whether it met trade expectations or not, mostly confirmed ideas that grain and oilseed supplies are ample and price prospects generally are bearish. Some in the trade see the record world stocks for all three commodities as the key factor pressuring futures going forward.
Despite the large domestic and global supplies of soybeans, wheat and corn, price weakness may be mitigated slightly but certainly not completely by strong demand.
For soybeans, China continues to buy massive volumes, although there is some concern China’s soybean imports may slow, and for the United States, export competition most certainly will increase from South America. For corn, the U.S. ethanol market remains a strong outlet with the U.S.D.A. raising its forecast of corn used to manufacture ethanol by 50 million bus in last week’s World Agricultural Supply and Demand Estimates report. Wheat may have a slightly steeper hill to climb, though, with competition from a broader array of countries, although good demand remains for high-protein U.S. spring wheat.
An indication of strong global demand is U.S. exports well above year-ago levels, according to U.S.D.A. data. For the respective marketing years through April 6, corn inspected for export was up 66% from the same period last year, wheat was up 31% and soybeans were up 13%. The wheat marketing year ends May 31, and wheat is expected to meet or even surpass the U.S.D.A. export forecast for the year. Corn and soybeans still have more than four months left, with the year ending Aug. 31, and some doubt corn will be able to maintain its strong export pace. Low prices may attract buying, while the strong U.S. dollar acts as a detriment, making U.S. exports more expensive.
Since the beginning of the “report season” with annual Prospective Plantings and quarterly Grain Stocks issued by the U.S.D.A. on March 31, followed by the monthly WASDE on April 11, old-crop soybean futures have firmed slightly while new-crop futures were little changed through last week. Old-crop and new-crop corn futures have gained about 15c a bu. And wheat futures were mixed, with Kansas City hard red winter and Chicago soft red winter contracts declining a bit more than 10c a bu and Minneapolis spring wheat futures gaining about 5c to 10c a bu. Prices for all three commodities moved higher last week. Still, the trade generally has a bearish price outlook for all three commodities going forward.
The trade will watch U.S.D.A. weekly Crop Progress reports during spring planting season for spring wheat and row crops, condition ratings for winter wheat, export data and of course near-term weather and forecasts for the growing season. The next key report will be May 10 when the U.S.D.A. issues its initial survey-based 2017 winter wheat production forecast and trend-based 2017-18 supply and use projections for all crops included in the WASDE report.