World Grain Supply Continues to Expand, Outweighing Demand Prospects

Corn: Lower lows and lower highs were acheived each day of the trading week as fresh news was lacking and market participants were awaiting updated USDA Supply & Demand figures. A rise in corn used for ethanol (+50 million bu) was offset by a lower feed and residual figures by -50 million bu. Aiding the bears, U.S. exports were left unchanged but there was an increase to Argentina (+500,000MT), Brazil (+3 million MT) and South Africa’s (+500,000MT) exports by +4 million MT.

South America’s crop size was also lifted and by a combined 6 million MT: Argentina’s crop size is now pegged at 37.5 million while Brazil is now seen at 91.5 million MT! This is likely to constrict gains in the near-term. Conab raised its estimate of the Brazilian corn crop up from to 88.9 from 87.4. The Rosario Board of Trade has readjusted its projection for Argentina’s corn crop ti 38 million MT from 36.5 million MT.

Weekly ethanol production fell from 1.034 million barrels per day in the previous week to now 1.022, as is the seasonal tendency to see production drop off week-to-week into May and move higher from there. Margins remain negative as uncertainty remains following last week’s political rumor.

Corn export sales totaled 834,169MT, in line with expectations. Every month since last July, combined shipments of corn, wheat and soybeans have been record-large. With increased world stocks that were already ample, especially in regard to feed supplies, it will be difficult for the market to get excited about demand prospects as 75% of the safrinha corn crop has been planted in central and southern Brazil and weather does not pose a threat.

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Soybeans: The soy complex also dwindled this week on anticipation for larger South American crop estimates from the USDA and Conab, which is exactly what the market received on Thursday. The USDA lifted Brazil’s soybean crop to 108 million MT (+4 million from prev report) but left Argentina unchanged at 55.5 million MT. Conab raised its estimate of the Brazilian soybean crop from 105.5 million MT to now 107.6 million. The Buenos Aires Grains Exchange left its soybean crop peg unchanged at 54.8 MMT today.

Also of note is that two major soybean producers in southern Brazil, Rio Grande do Sul and Paraná, reported favorable crop conditions. The most recent information from the state of Paraná says that nearly 99% of the surface planted of both corn and soybeans are under “good conditions”, as 91% of the corn is under maturation and 68% of soybeans at the same stage with 56% of the crop harvested.

During the month of February, Brazil exported a record 3.51 million tons of soybeans which was up 72% compared to a year earlier, but it was short of what had been expected. The line-up for February had expected to be 5.7 million tons, but wet weather delayed some of the soybean harvest and logistical problems delayed soybean deliveries to especially the northern ports.

The USDA lowered U.S. exports by -25 million bushels and raised the domestic crush by +10 million bushels, which resulted in an increase to U.S. domestic ending stocks by +15 million bushels to 435 million bushels.

WRITTEN BY Alyssa Badger

Alyssa started her career in 2008 at the Board of Trade managing a firm that had a primary focus in grains. The nucleus of her position centered around order entry and research development; from there, Alyssa's enthusiasm for commodities continued to grow and expand. This enthusiasm lead her to move to West Texas and assist in hedging for the largest originator of U.S. cotton to textile mills worldwide. Alyssa has now settled back in Chicago as a Trading Consultant for Highground Trading, Inc. Contact Alyssa