Grains
We have the WASDE update later this morning, but generally speaking I don’t expect many fireworks. Here is a quick rundown of items to watch:
Wheat
I don’t think there is going to be much to get excited about in terms of the wheat numbers today. The US balance sheet will probably hold very little change. As noted yesterday, I believe there is an argument to be made for a higher export figure than the 975 mil bu WASDE is currently carrying. It seems the average guess is somewhat baking this in with their call for a 10 mil bu reduction in ending stocks. This seems reasonable to me, but I would note that we should also be prepared to see WASDE wait and see on exports. With other categories unlikely to change, it is possible we get no change in ending stocks. I don’t think that would be a market-moving difference vs. the average guess, however.
I don’t see any major changes in the world numbers forthcoming either. I know some are upping their Indian wheat import figures, but WASDE already posted a small increase last month and I think they’ll sit there for now. Overall, don’t look for any fireworks today from wheat.
Soybeans
The average guess calls for an 8 mil bu reduction to carryout from last month’s 420 mil bu. I’m not exactly sure where this is supposed to come from. Export demand has been solid, but as of now it would not imply anything greater than the WASDE projection (2,050 mil bu) and some are starting to argue for a lower figure. Crush demand is unlikely to be raised either. Note meal exports continue to disappoint. While a reduction in meal exports could be funneled into domestic disappearance, it certainly doesn’t appear that the market needs more product. Imports are unlikely to be changed either. So, I’m at a loss to see where the average guess thinks demand will be increased. Still, my expectation for the balance sheet to be left entirely alone shouldn’t provide any spark to prices.
It is highly likely that WASDE lowers their Argentine production forecast today and perhaps the average guess is assuming that might prompt WASDE to increase US exports? I somewhat doubt that. I think part of the lower production will be offset simply by lower Argentine stocks and WASDE also likely needs to raise their Brazilian export projection. This all adds up to potentially lower world stocks, which the average guesses are calling for. However, keep in mind this doesn’t account for a potential increase to Brazilian production. Right now most are expecting that to remain unchanged at 104 mmt, and I agree. However, it is possible we could see an increase. Remember Conab will be out early this morning with a production estimate update.
Corn
At the risk of sounding like a broken record, I don’t really expect a lot of change from WASDE here today. The average guess calls for a 20 mil bu reduction in carryout, and I can get behind that I suppose. Certainly most are penciling in larger ethanol grinds than the current WASDE projection of 5,325 mil bu. Matching this projection would require a monthly corn grind of roughly 431 mil bu going forward, which would essentially match the average pace seen from Feb-Aug last year. Right now it would be hard to argue that we won’t exceed this pace, so an increase in the ethanol grind is likely. The average guess calls for a 20 mil bu reduction in carryout, though I would caution the increase could be as much as 50 mil bu. I think there is also a case to be made for a potential increase to export demand, but I think WASDE can sit where they are for now. IF they were to raise both ethanol and exports today, it is likely they’d cut F&R a little as a partial offset.
In the world numbers, again South American production will be the key focus. I think it is probable WASDE lowers their Argentine production figure but raises their Brazil production total by a similar amount. This will likely result in minimal change to global production. Brazilian corn imports need to be increased and exports decreased, but this probably doesn’t result in much change to their bottom line. I can’t think of anything else right now that is likely to be changed. The average guess calls for a minor reduction in global carryout, and I find myself in agreement.
The bottom line here is that we’re not likely looking at any “wholesale” changes in today’s numbers. Even if we do have some misses vs. the average guesses, it’d have to be something pretty shocking to change the overall market sentiment.
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