MarketsFarm — Updated supply/demand estimates from the U.S. Department of Agriculture on Wednesday included only minor revisions, with the lacklustre report doing little to move the market.
While South American production numbers were revised lower, further downward revisions are likely in subsequent reports, according to a market analyst.
“We were a little surprised the USDA didn’t make any adjustments to U.S. corn demand,” Terry Reilly of Futures International in Chicago said.
Many in the trade had expected to see USDA shift some of the global export demand for both soybeans and corn to the U.S., he said, given the likelihood of reduced South American production.
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U.S. corn ending stocks for 2021-22 were left unchanged at 1.54 billion bushels by the government agency, coming in above trade guesses which on average had called for a small reduction from the previous month. U.S. soybean stocks were lowered to 325 million, from 350 million in January, but still were at the higher end of expectations.
World stocks of the two crops were lowered on the month, but above trade guesses. The world corn carryout was pegged at 302.2 million tonnes, down by 1.2 million from January. Soybean ending stocks were forecast at 92.8 million tonnes, which would be down by 2.4 million from January, but well above trade guesses closer to 91.1 million tonnes.
The government agency lowered its forecast for Brazilian soybean production by five million tonnes from January, now pegging the crop at 134 million tonnes. Argentina’s soybean crop was down by 1.5 million tonnes, at 45 million. Brazil’s corn crop was revised down by a million tonnes, to 114 million, while Argentina’s corn crop was steady at 54 million tonnes.
“We think the USDA still has some work to go in adjusting South American soybean and corn production,” Reilly said.
With both corn and soybean futures showing strength in the immediate aftermath of the report, “I think the trade is trading numbers that are lower than the USDA for South American production,” he said. He expected to see more downward revisions in future reports.
From a chart perspective, Reilly placed March corn in a range between $6.20 and $6.80 per bushel (all figures US$). For soybeans, he said an upside target of $16 per bushel was within reach, with the next resistance at $16.50 “if we continue to see declines in South American production.”
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
