“Statistics do not convey emotion. They shock us for a minute or two, and then we click again.” – Madeleine M. Kunin (American politician)
Grain markets this morning are mostly in the red as the market digests the lack of bullish surprises in yesterday’s February WASDE report.
As Garrett walked through in his recap of instant reactions to the WASDE, there were some surprises but mostly the market reacted fairly mute.
The key takeaways were that total South American soybean production basically said the same, US corn exports were raised, while American soybean stocks ballooned thanks to lower exports.
While Garrett also did a solid analysis of yesterday’s WASDE numbers in the late afternoon, let’s dig into some of the key takeaways.
Updates to North American, Global Balance Sheets
Corn prices yesterday got a nice little bump thanks to US corn exports getting increased by 125 million bushels. This dropped ending stocks a bit (as shown in the chart below) but one could easily argue that some of this increased demand was already priced in.
With some heavier trade globally, worldwide ending stocks were lowered by about 3.5 million tonnes.
On the domestic wheat balance sheet, slower exports were to blame for American ending stocks climbing by 20 million bushels. From a global standpoint, wheat stocks were dropped by about 2 million tonnes on great trade activity from Russia, Argentina, and Canada.
We asked the broader question in GrainCents this week if global wheat stocks are really dropping.
There are some contrasting thoughts about the condition of the winter wheat crop in Russia especially, with one school saying the most recent blizzard there will help things (AKA another bearish headline from Russia) while the other idea is that it would be enough to recharge the soils after a dry autumn and an early winter in which not a lot of snow fell. 
The most bearish thing about the WASDE was arguably seen in US soybeans. Exports were felled by 60 million bushels to 2.1 Billion bushels. This takes ending stocks for the 2017/18 crop year up above 530 million bushels. This is quite the increase year-over-year.
What’s up with South American Soybeans?
The WASDE report first showed us that Argentine soybean production has dropped by 2 million tonnes to 54 million. This was in line with the market’s pre-report expectations. Separately, the Buenos Aires Grain Exchange dropped its production figure down to 50 million tonnes, 1 million lower than their previous estimate.
However, the USDA also raised Brazilian soybean production by 2 million tonnes to sit at 112 million tonnes. Thus, the 2 million tonne drop in Argentina was offset by this increase in Brazil and
The US did not change its production figure for the Brazilian corn crop. The agency said that Brazil’s output would be 95 million tonnes. That decision was strongly different than CONAB’s most recent production who slashed their corn production estimate in the country by nearly 4.5 million tonnes to go down to 88 million tonnes.
For Argentina’s corn, the USDA slashed Argentina’s production estimate down to 39 million tonnes, a 3 million-tonne decline from January’s estimate.
Side note: China’s soybean balance sheet was left alone, but monthly data indicates imports could be above the USDA’s estimated 97 million tonnes. We certainly know that COFCO, one of China’s state-buying grain agencies is the real king of soybeans though.
The key thing about the South American numbers is that it doesn’t necessarily account for the weather over the past two weeks. And it’s been pretty dry in Argentina.
Domestically, soymeal and soy oil prices in Argentina are starting to rally as the market continues to be concerned about production.
While last weekend everyone was watching the Superbowl, with this week’s WASDE now out of the way, everyone will be watching Argentina’s rains. We’re at a fairly important point in the growing season of the corn and soybean crop there and after a few weeks of dry conditions, a continuation of that would be fairly bullish.
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