USDA WASDE Worksheet and South America Update - Tuesday, 13 February 2018

Update for February 13, 2018

 

As we inch closer to planting season in the U.S. new crop corn and soybean price ratios are beginning to gain more attention.   The ratio for corn to soybeans typically runs around 2.5:1, meaning it takes 2.5 bushels of corn to equal the value found in 1 bushel of soybeans and any divergence from this has shown to persuade acres to move in one direction or the other. Currently this ratio sits at 2.6:1 which gives soybeans a slight advantage over corn. If this price advantage continues it’s possible that we will see more double-cropping especially in southern states this season. As always though the weather tends to dictate some planting decisions for producers.  Over the past few weeks there has been a slight increase in La Niña readings which makes it more likely the U.S. will be impacted to some extent this growing season by the weather pattern.  In most La Niña years the southern U.S. tends to experience drought conditions while the northern states tend to see wetter weather. If this indeed occurs it is likely southern states will plant more corn acres due to the early planting opportunities.

Last week the USDA announced the latest WASDE numbers which brought some surprises to the market.  Traders were surprised to see the corn carryout number come in below the estimated range while the soybean carryout was raised to the top of range estimates.  Corn exports for 2017/18 were significantly increased in the February report with an increase of 125 million bushels, soybean export estimates were reduced by 60 million bushels.  These adjustments delivered the 2nd largest increase in corn demand for February in recent history and the largest change in soybean demand for the month.

 

 

2017-18 USDA U.S. Grain Carryout (bln bu)

 

USDA

Feb

2017-18

Average Trade Est.

Range of

Trade Est.

USDA

Jan

2017-18

Corn

2.352

2.468

2.425-2.550

2.477

Soybeans

0.530

0.486

0.460-0.535

0.470

Wheat

1.009

0.990

0.974-1.014

0.989

 

2017-18 USDA World Grain Carryout (million tons)

 

USDA

Feb

2017-18

Average Trade Est.

Range of

Trade Est.

USDA

Jan

2017-18

Corn

203.09

204.66

198.90-208.00

206.57

Soybeans

98.14

98.61

97.00-100.50

98.57

Wheat

266.10

267.80

265.00-269.71

268.02

 

 

 

2017-18 USDA South American Production (million tons)

 

USDA

Feb

2018

Average Trade Est.

Range of

Trade Est.

USDA

Jan

2018

ARG Corn

39.0

40.7

40.0-42.0

42.0

ARG Soy

54.0

54.1

52.0-56.0

56.0

BRZ Corn

95.0

93.7

87.1-95.5

95.0

BRZ Soy

112.0

111.2

111.0-112.50

110.0

 

The expected crop size for South America was increased in this report but given current weather issues those estimates are expected to fall. These weather concerns have made farmers in Argentina hesitant to sell corn because of the ongoing drought and farmers in Brazil are slow to sell due to the delay in planting the 2nd crop corn due to saturated soils.  This is bringing more business to the U.S. and helping to increase our annual corn exports which had been declining for the past year.  Slow harvest progress in Brazil has also assisted U.S. soybean demand, last year Brazil reported 3.5 million tons of soybeans were exported in February this year only 1.5 million tons are expected to make it to the port.

The Mato Grosso Institute of Agricultural Economics (IMEA) reports that 27% of the safrinha crop has been planted compared to 46.7% last year and the 5 year average of 25.4%. In Parana approximately 2% of the safrinha crop has been planted compared to 16% a year ago. Given the difficult circumstances facing producers with the planting of the safrinha crop the Secretary of Agriculture for the state of Parana has extended the date for insurance eligibility from February 10th to February 20th. It’s expected that farmers that are unable to plant safrinha by the February 20 deadline will likely opt to plant more wheat or oats instead.

Reuters is reporting that several corn buyers from China have canceled purchases from the U.S. and have switched those orders for corn from Ukraine.  The Chinese government as begun to tighten controls on genetically modified crops and have made it harder for Chinese grain mills to get the permits required to process the GMO corn this year. It’s unclear exactly how many cargo loads this has affected but estimates are that up to 4 loads totaling 210,000 tonnes and valued around $40 million were canceled last month. In addition AgriCensus reports that tense trade relations between the U.S. and China has led private exporters from the U.S. to announce Monday the cancellation of nearly 500 MMT of soybean exports to China.

Politico reports that corn producers in Mexico are lobbying for a renegotiated NAFTA to include a huge 45% tariff on U.S. yellow corn exports to the country. There is also concern that this may be extended to other U.S. grain exports to the country.  Under rules from the World Trade Organization, Mexico can impose tariffs of 45% to 70% on U.S. agriculture products. 

WeatherTrends 360 is forecasting a change in the weather pattern with winter finally arriving in parts of the West and a milder pattern in the East.  Don’t put the snow boots away quite yet though as the pattern is expected to flip back to cold temps for the eastern U.S. in late February through at least the 3rd week in March.  The weather group also predicts that the U.S. will receive a hit from another major winter storm sometime before the end of the season.

 

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