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Last night, the market rolled back on itself after the USDA printed a very vanilla April WASDE (World Ag Supply & Demand Estimates) report. With most of the focus on South America, the trade had expected the USDA to make some cuts to both Brazilian and Argentine production. However, the USDA saw fit to hold both corn and bean production for Brazil while making only modest cuts to Argentinian corn.

There is now some significant discrepancy between some of the competing advisory bodies. The USDA held firm on Brazil’s beans at 155mmt, while Brazil National Analytical Agency (CONAB) calls the crop 146mmt. Similarly, the USDA’s unchanged position of Argentina’s corn crop of 55mmt is above the 50mmt disease-impacted crop being forecast by Buenos Aires Grain Exchange.

 

Global ending stocks of the principal commodities were lowered compared to the March report, but the US saw subtle increases due to lower-than-expected exports. The report also highlighted the dominance of the Black Sea with Russian exports increased to 52mmt and Ukraine exports upped to 17.5mmt.  The recent pace of Ukrainian exports however is expected to slide in the coming months as exportable stocks are drawn down and Russia’s continued attacks on export infrastructure around the deep seaport of Odessa is starting to have an impact.

 

The global stocks to use did decrease fractionally to lows not seen since 2015. The limiting factor here preventing prices from rallying, is the abundance and price of Black Sea grain and its proximity to the key importing nations around the Mediterranean.

 

Remaining in Russia, the current season crop had a reprieve in the last week with showers observed through the important southern regions. The rains have helped to stabilise a crop that had been getting dry. The forecast bears watching though as the south and central areas still need finishing rains and the spring-sown wheat areas (north into Siberia) are being sown dry. Rains in the second half of April are going to be crucial if Russia is going to produce anything near the 92mmt currently forecast.

  

Next week

While USDA figures not falling in line with most traders’ estimates saw a broad sell-off across commodities, I’m not convinced that this will remain the case. There are plenty of questions about the difference in numbers and what this will mean if US production falls short. Geopoli-tics will also play a part, with the war in Ukraine seeming to ramp up and the Middle East rap-idly becoming a hornet’s nest.

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Data sources: USDA, Reuters, SovEcon, CONAB, Mecardo

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