Market Analysis

The USDA returned to its conservative approach in its February US balance sheets despite some sizable Argentine crop changes this month.

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Because of heat & dryness during January, the World Board cut both of Argentina’s soybean & corn outputs sharply and below the trade’s prereport averages. However, Brazil’s crop levels were unchanged as rainfall in Mato Grasso seem to compensate for dryness in Rio Grande. No change in either US soybeans or corn 2022/23 export forecasts were surprises.

The World Board dropped 4.5 mmt from their Argentina’s soybean outlook to 41.0. This was 1.34 mmt below the trade’s average estimate, but this forecast was still above many S Am consultants & Bunge, a S. Am exporter, who voiced a mid-30’s projection at their quarterly earnings call. Given Brazil’s mixed moisture situation, the USDA left Feb’s soybean estimate unchanged at 153 mmt, With the trade expecting a drop in US exports, the USDA’s 15 million cut the US crush was a bit of a surprise which upped US bean stocks to 225 million.

This year’s drought in Argentina also impacted their corn crop. The USDA sliced 5 mmt from last month’s outlook cutting this crop to 47 mmt. Similar to beans, this projection was 1.5 mmt below trade’s expectations & some S American 43-44 mmt forecasts. The World Board also left its Brazilian corn crop unchanged at 125 mmt given the diverse moisture conditions from north to south in Brazil. With the current foreign sales 43% behind last year, the USDA’s no change in its yearly export estimate was a surprise. However, the World Board did reduce corn’s ethanol demand by 25 million bu because of December’s cold spell cutting output. These adjustments raised corn’s US stock by 25 million to 1.257 billion, the trade’s average estimate.

US wheat demand changes were minor with food down 2 million & seed up 1 million. Australia & Russia crops were upped 1.4 & 1 mmt each raising the world’s end stocks 1 mmt to 269.4 mmt. India & the US S Plains will be wheat’s next two production focuses.

What’s Ahead:

Despite some significant Argentina crop cuts, the USDA’s US corn & soybean balance sheet changes were modest. However, South America’s weather in MT impacting the safrina corn output if plantings are delayed & the high portion of Argentina’s output in its 2nd planting period keeps this region’s output vulnerable.

Hold old-crop corn & soybean sales at 80% and sell 10% of new crop at $6.03-10 & $13.80-90.

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