Now that the April supply and demand report has been released trade is back to focusing on traditional fundamentals. The most notable of these is demand, which has been less than hoped for this marketing year. We continue to see buyers pass on US grain offerings in favor of cheaper stocks from other sources. We are hearing rumors that China bought both corn and soybeans yesterday, but so far, these have not been confirmed. Sources claim the US is “not satisfied” with Chinese trade talks which casts a shadow of doubt over any purchases. Trade is also concerned with news the US wants to impose $11 billion in tariffs on EU imports. All eyes in the market are on the spring storm moving into the Plains and Midwest that could bring over two feet of snow and 70 mph winds to those areas.
The USDA raised its corn carryout estimate in yesterday’s balance sheets as the stocks data from March was added into the figures. This was enough to push US corn carryout above 2 billion bu. The USDA also increased South American corn production, and the combination of these pushed world corn stocks up 4 million metric tons. Bottom line is the world market has plenty of corn to satisfy demand, and stocks could get even larger given current weather conditions in South America. Funds remain heavily short in the corn complex which is preventing additional selling from taking place, and helping put a floor under futures.
Soybean carryout was reduced by 5 million bu yesterday which actually came as a surprise. Most analysts had been expecting an increase to reserves. Domestic soybean reserves are far from bullish though with 895 million bu of carryover projected. Global soybean stocks also increased and now stand at 107.3 million metric tons. Soybeans continue to struggle with low demand in the global market and ongoing trade issues. Domestic demand remains strong though as crush margins are quite favorable, ranging from $1.00 to $1.50 per bushel. The main factor for soybeans that all traders are keeping an eye on is weather in the Plains and what it means for this year’s planted acreage. The USDA increased soybean seed usage in yesterday’s report, which shows they may be leaning for more acres in the June revisions.
Wheat ending stocks came in at 1.087 billion bu, topping trade expectations. The global number was also larger than expected at 275 million metric tons. What wheat is more focused on at this time is the low demand we are seeing for our offerings and the fact this year’s crop is the highest rated in the past five years. There are thoughts the wheat rating will deteriorate after the week’s storm moves through the Plains though. There are also some thoughts we will see lower production as early planting to the spring crop is becoming less likely. Wheat futures are technically over-sold though, which is offering support.
This commentary is the sole opinion of Karl Setzer. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to contact Karl Setzer at 800.858.3738, extension 411, or at firstname.lastname@example.org . You can also follow Karl on twitter; @ksetzergrains