February WASDE Recap

February WASDE Recap

Front-month grain futures closed lower following Tuesday’s relatively non-exciting WASDE report. However, when looking under the hood, grain bulls can get excited about a few anecdotes. Global corn ending stocks were reported at multi-year lows, and South American production estimates for corn and soybeans were lowered. Lastly, the domestic wheat balance sheet tightened, with domestic use jumping 4 million bushels, resulting in a 4 million bu slash to ending stocks.

Corn

The domestic corn balance sheet was completely unchanged, which served as a bit of a bearish surprise as traders anticipated domestic ending stocks to come in between 1.526 bil bu. South American corn production was notched lower due to the dryness observed in Argentina and the delayed planting progress for second-crop corn. While it remains early, the Brazilian planting pace is becoming a more significant risk factor by the week. The net result of the global balance sheet alterations was a 3 million ton reduction to world ending stocks, which are now just 290.3 MMT. It’s worth noting that this is the 8th time in the last 10 years that USDA has opted to cut global ending corn stocks.

Soybeans

Much like corn, USDA punted on altering the domestic soybean balance sheets. They also decided to kick the can down the road on the Brazilian soybean crop despite Patria Agronegocios slashing their Brazilian production estimates to 165.87 MMT from 167.94 MMT last month. It’s on-brand for the USDA to remain steadfast in their estimates, as Brazilian production estimates have varied tremendously depending on the contributor. The production cuts for Argentina were significant and were primarily responsible for the 4 MMT reduction in global ending stocks to 124.34 MMT - well below the 127.79 pre-report estimate.

Wheat

Everything continues coming up aces for wheat. Although the domestic use changes were nominal, it’s another feather in the cap of the bull camp. Domestic food use was boosted by 4 mil bu to 970, translating to a 4 mil bu cut in U.S. ending stocks at 794 mil bu. Global wheat consumption estimates were increased mainly due to the poor EU crop. However, global trade was slashed by 3 MMT due to China’s slowest import pace in the last 5 years. In the instance that China decides to come back to the import market, it would be a major catalyst for wheat prices. Over the past few years, China has played a major role in the wheat trade, and their absence is noticed. Any renewed activity there would be felt almost immediately as global stocks remain tight.

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