Corn field US

Much of the news this week has centred around the USDA’s World Agricultural Supply & Demand Estimates (WASDE) report. Pre-report, much of the money was on tightening stocks amidst on-going Chinese demand. As with many of the USDA reports, you should never count your chickens before they hatch.

You can read the summary of the figures in and key changes from the WASDE in yesterday’s article (view here). The report, it should be said, was still mildly supportive for wheat and beans, but corn numbers were slightly bearish despite the short odds of tighter stocks. Generally, global production was slightly higher for the three main commodities.   However, global demand is sharply higher for wheat, unchanged for beans and lower for corn leading to tighter wheat stocks, slightly lower bean stocks, but higher corn ending stocks.

It’s interesting how a report, somewhat contradictory to firmly held beliefs, can really pull the rug on the market. The picture still remains thus:

Ample global wheat stocks, but they are tightening and now we have some political interference that will muddy the waters. Demand is strong but wheat will likely remain a follower of corn and beans.  Watch for any perceived issue as the Northern Hemisphere emerges from dormancy in the coming weeks.

Beans remain the commodity with the strongest fundamental bullish tone in the market.  Huge importance is now placed on South American production and supply chains.

The kicker for corn was in the reduced feed demand numbers leading to higher ending stocks.  Fundamentally, stocks are tight, so corn prices should recover from this set back.  As above, huge importance going forward on South American production.  It won’t take a big setback to get the corn bulls excited again.

The initial market weakness on the report’s release was exacerbated by the cancellation of 132kmt of export sales (corn).  It is unsure if the buyers were looking to switch origins from US to South American or if it was thought cheaper prices could be achieved after the report’s findings.

Next week

Short term, the wheat market will be a follower of corn and beans.   I would expect after the shock of the WASDE report wears off, the market will find its feet again and pick up where it left off.

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Click on graph to expand

Click on graph to expand

Data sources: USDA, Reuters, Dartboard Comm’s, Mecardo

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