USDA March Report Update and RFS Reform - Thursday, 08 March 2018

Update for March 8th, 2018

The March USDA Supply and Demand Report was announced this morning.  Some of the particular highlights for both corn and soybeans are shown below.

Corn

  • U.S. corn stocks were reduced by -225 million bushels.
  • Corn used for ethanol was increased by +50 million bushels.
  • Corn Exports were raised by +175 million bushels.
  • Production in Argentina as lowered to 36 MMT’s.
  • Exports from Argentina were lowered from 27.5 MMT to 25.0 MMT.
  • Exports out of Brazil were unchanged at 35 MMT.
  • Chinese corn imports were raised from 3 to 4 MMT’s.
  • The South African crop was increased from 12.5 to 13.0 MMT’s.
  • The EU corn crop was increased from 60.1 to 61.1 MMT’s

Soybeans

  • Domestic U.S. ending stocks were 25 million bushels higher than the trade had anticipated.
  • U.S. crush was increased by +10 million bushels.
  • Exports were decreased by -35 million bushels.
  • Global ending stocks were lower than expected.
  • World soybean production was decreased from 346.9 to 340.9 MMT’s.
  • Exports of soybeans from Argentina were lowered from 8.5 to 6.8 MMT’s
  • Exports of soybeans from Brazil were raised from 69 to 70.5 MMT’s.
  • Chinese soybean imports were left unchanged at 97 MMT’s.

 

 

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

 

USDA

Mar

2017-18

Average Trade Est.

Range of

Trade Est.

USDA

Feb

2017-18

Corn

2.127

2.312

2.240-2.352

2.352

Soybeans

0.555

0.530

0.490-0.580

0.530

Wheat

1.034

1.015

0.995-1.099

1.009

 

2017-18 USDA World Grain Carryout (million tons)

 

USDA

Mar

2017-18

Average Trade Est.

Range of

Trade Est.

USDA

Feb

2017-18

Corn

199.17

199.36

192.30-203.10

203.09

Soybeans

94.40

95.31

93.00-98.10

98.14

Wheat

268.89

265.63

263.00-267.50

266.10

 

2017-18 South American Production (million tons)

 

USDA

Mar
2017-18

Average Trade Est.

Range of

Trade Est.

USDA

Feb

2017-18

ARG Corn

36.0

36.58

34.00-38.50

39.00

ARG Soy

47.0

48.36

43.00-53.00

54.00

BRZ Corn

94.5

92.22

86.20-96.00

95.00

BRZ Soy

113.0

113.82

112.00-116.00

112.00

 

 

Generally speaking, markets tend to put in the high for the year while weather concerns are in the forefront and the Funds finally heavily invest into a big net long position.  During this portion of the year the weather in South America is the focus of the markets attention and as of today there has been a change in the extended forecast for Argentina’s crop regions. The latest models, just out, now show a chance for a significant rain event of 3+ inches over most of the growing areas during the 3rd week of March.  The forecasts for the next 7 days shows the dry pattern remaining in place and even with the wetter pattern forecast for the 3rd week of the month the precipitation totals are still predicted to stay below normal as we move into the 2nd half of March.

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Forecasts for much of Brazil show a drier pattern developing with below normal precipitation expected for the next 2 weeks for the central and southern growing regions.  This will assist producers in these areas with soybean harvest as well as the planting of the safrinha corn crop.  In the northern part of the country though Mato Grosso and Goias are forecast to remain wet during the 2 week period.

Another meeting regarding the U.S. biofuels mandate was scheduled to take place today at the White House.  According to S & P Global Platts, the meeting will be fourth meeting on proposals to reform the RFS and the third meeting held on the subject in only 2 weeks.  Senators on both sides of the RFS issue have said that they will keep working toward a solution that would reduce the RFS compliance costs for refiners while still working to grow markets for ethanol.  Key supporters of ethanol including Senator Charles Grassley from Iowa, said that they are not willing to accept a bargain that would trade higher ethanol blends for a price cap on RIN’s.

** RIN’s or the Renewable Identification Number was developed as a way to insure that the prescribed levels of blending set in the 2007 Energy Independence and Security Act are reached.  The RIN is in some regards a form of currency used in this process and is a crucial component to ensure that the mandate is followed and compliance is achieved.

(The diagram below shows the process involved using the RIN)

RIN Lifecycle

This diagram describes the process a Renewable Identification Number (RIN) goes from generation as an attached RIN, separation, and then retirement to fufull a Renewable Volume Obligation (RVO).

Southeastern areas of the U.S. are expected to receive heavy rains over the coming week.  Lighter precipitation is forecast for the southern and eastern portion of the Corn Belt.  Winter wheat in the Plains (Kansas and Oklahoma) will see some opportunities for rainfall but most of the driest areas (see drought monitor map below) will see no precipitation.

 

 

 

 

 

Notice the shift in precipitation pattern from the 6-10 day outlook to the 8-14 day outlook.  Drier than normal conditions continue across the Plains for the first part of the outlook but then the forecast changes to a wet forecast for the 8-14 day extended outlook.

 

 

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