Grains
We have the WASDE update later this morning, though as WASDE reports go this should not be a major market-mover. Keep in mind we won’t get 17/18 balance sheets until next month’s report.
Wheat
Following the Quarterly Stocks report, it seems fairly obvious that WASDE will need to lower their F&R estimate. The debate centers on by how much? I think for now WASDE will probably lean towards a reduction of ~25 mil bu, though as always any F&R number is nothing more than an educated guess. I don’t anticipate any other changes to the US balance sheet. I know there are some that are carrying smaller export figures, but I’m of the opinion commitments are strong enough to allow WASDE to remain unchanged for now. So, the bottom line for me is something around a 25 mil bu reduction in F&R which is pretty close to what the average guess calls for. No argument from me.
I’m not sure if we should expect any changes to the world balance sheets either. Next month’s WASDE will be much more interesting with the introduction of the 17/18 balance sheets.
Corn
Similar to wheat, the larger than expected Quarterly Stocks figure implies WASDE will likely lower their F&R estimate. I’m guessing the reduction could be anywhere between 50-100 mil bu from the 5,550 mil bu previously projected. My main question into today’s report is what demand increases might offset some of this reduction? I think it is fairly obvious that WASDE will likely need to raise their ethanol grind again, but how much? I could see this being raised by 50 mil bu, which would offset all or half of the above mentioned F&R reduction. There is also a pretty good argument for raising the export projection as well, maybe by 25-50 mil bu. So with that in mind, I think the combination of changes today might result in an unchanged carryout figure. The average guess calls for only a very modest increase from last month, so I don’t suspect this would catch many by surprise.
In the world balance sheets, I think most are leaning towards bigger South American crops but WASDE is already pretty big. With so much more time to go on the safrinha crop in Brazil, I wouldn’t be shocked to see these left unchanged today. Even if we do see increases in production levels, I don’t suspect there will be major demand changes as these changes will likely have a greater impact on next month’s 17/18 balance sheets.
Soybeans
The same storyline is present here—a larger stocks figure likely implies a reduction in residual. The change should be fairly minor, probably something between 15-25 mil bu off the 33 mil bu projection last month. The average guess is accounting for this, showing carryout up roughly 12 mil bu from last month’s report but I think that might be missing the fact that export sales and shipments have been performing better than expected over the past month. I think WASDE is in a rare position of needing to reverse their reduction in last month’s export projection and add that demand back into the balance sheet today. That should largely offset the change in residual and probably should lead to a near unchanged carryout.
Expectations are for a slightly larger Brazilian crop and a near unchanged Argentine crop. Given comments and private production estimates, I have no argument against either assumption. Again, keep in mind this “extra” supply probably won’t find its way into the demand side of the ledger until the 17/18 balance sheets are released next month.
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