The Holy Grail’ of the agricultural calendar each month is the USDA’s World Agricultural Supply and Demand Report.
The build-up to each month’s release provides as much conjecture as does the subsequent critical analysis of where the USDA is wrong.
Regardless of the result, the data provides the most consistent and transparent set of estimates across a broad range of commodities and markets.
The USDA report has a reputation for establishing the tone for the first half of the year. The latest report, released on Wednesday last week, has set the scene for the lowest stocks-to-use ratio for soybeans and corn in 20 years, set among the largest-ever production of wheat, soybeans and corn last season. The report indicated an unexpected increase in US wheat exports and while the US carryout at 818 million bushels is considered ample at this point, foreign origin balance sheets are considered tight.
Argentina’s wheat crop was reduced to an estimated 14 million metric tonnes (mmt) as compared to the previously reported 13.5mmt last year, and Kazakhstan’s crop posted at 9.7mmt, down from December’s 11mmt.
Australian and Canadian feed wheat offers are expected to impact the US’ ability to offer competitive exports in milling wheat.
Unless northern hemisphere wheat condition concerns start to drive wheat futures, it looks as though wheat will follow corn for now.
US corn yields were well below expectations and have been cut for the fourth consecutive month.
The Argentine crop is estimated at 23.5mmt, a reduction from the 25mmt estimated last month.
Record US demand at 13.4 billion bushels is yet to show demand destruction at current prices.
What the market now needs to do is to ration corn use and drive up plantings via increasing prices. However, soybeans need to achieve the same.
This is the fight for acres’ scenario you hear marketers and traders talk about.
It creates a bullish outlook for all grains and northern hemisphere weather issues could have an explosive impact on the market if they emerge.
In a side note to world trade, some governments are working harder to subsidise food prices in an attempt to curb domestic food inflation.
Those that actively manage strategic reserves with that end purpose, notably China, India and Egypt, have new members.
In a press release this week, Saudi Arabia announced plans to ensure future food supplies by increasing their internal reserve program to cover 12 months of supply, while South Korea will establish a trading company that will acquire up to one third of their domestic use (currently 14mmt).
Along with the January report, I too am a recent addition to the CBH Grain team.
As head of trading, my role is to manage the trading side of WA’s largest grain marketer managing market trends and forces while working to get the best outcomes for farmers when they sell their crops to CBH Grain.
