April WASDE is generally neutral, save for soya bulls

11.04.2018

The latest USDA WASDE report for April 2018 has raised its estimates of global wheat stocks for this year to a new record, but as expected, reduced soya and corn ending stocks in line with reduced projections for Argentina’s crops. World oilseed and cotton stocks are forecast to fall, but an increase is projected for rice.

“Bullish soybeans, bearish soybean oil, neutral meal, neutral corn and neutral wheat, in our opinion,” observes Terry Reilly of Futures International.

The USDA believes increased wheat production will lead to global supplies exceeding additional consumption, with world 2017/18 wheat ending stocks raised by 2.3 million tons from the March estimate to stand at 271.2m tons, a new record.

On the supply side, the USDA increases world production by nearly 3m tons to a record 759.8m tonnes, with Morocco recovering from last year’s severe drought, and Iran continuing its trend over recent years of using less of the cereal.

While projected global wheat world consumption rises in line with higher use in the EU and Indonesia, more than offsetting reductions in Iran, India and the US, it is less than the increased projection for wheat supply output.

Record Russian wheat exports

The Department predicts little overall change in the volumes of wheat traded on international markets, although this masks the continued rise of Russian export volumes – up 1m tons to 38.5m tons for 2017/18, which is a 10m ton rise on last year’s record export volume. Wheat exports from Argentina and Kazakhstan also increase.

“Russia continues to displace the EU and other exporters in several markets,” notes the USDA. “Imports are lowered for Morocco, Brazil, and Colombia while increased for Algeria, Ethiopia, Japan, Kenya, Turkey, and the Philippines.”

Corn stocks to fall

Global corn ending stocks are 197.78m tons in the April WASDE, down from 199.17m tons in March. But record US corn stocks on March 1 are expected to continue displacing wheat in animal feed manufacture over the rest of 2017/18.

As widely forecast, corn production in Argentina and Brazil is marked down due to the dry conditions which have reduced yields and a smaller planted area in Brazil. April’s WASDE projects a combined corn reduction of 14.5m tons across the two countries, falling below the record output of last year.

These figures will result in lower corn exports from Brazil and Argentina, which may lift US exports in the first half of the 2018/19 marketing year.

Rise in rice exports

Global 2017/18 rice ending stocks are raised by 1.4m tons to 144.4m tons, the second highest stocks on record, in line with rising supply and a slight decrease in usage.

Rice exports are expected to lift by 0.8m tons, primarily by Thailand, Burma, India, and Pakistan, with Indonesia and Bangladesh absorbing this volume.

Soya stocks down 6m tons

A 6.1m ton reduction for global soybean production is marginally offset by increases for canola, sunflower seed, copra and palm kernel, but WASDE reduces overall world oilseed production for the year by 5.7m tons to 568.8m tons.

Global soybean ending stocks are lowered by 3.6m tons from last month to stand at 90.8m tons, in line with reduced stocks in Argentina, Brazil, and the EU.

Argentina’s soybean production is lowered by 7.0m tons to 40.0m tons through a combination of a smaller planted area and yields reduced by dry weather in the growing season. This in turn will see the national soybean crush down 1.8m tons to 41.2m tons, resulting in less Argentine product exported internationally.

By contrast, Brazil’s production is raised by 2m tons to a record 115m tons as projected yields in the main soya growing regions of Mato Grosso, Mato Grosso do Sul and Parana benefited from rainfall during the growing season.

Global soybean export forecasts for 2017/18 are reduced by 0.2m tons, with higher exports from Brazil, Russia, and Ukraine offset by lower volumes from Argentina and Uruguay.

“Importantly, world soy crop today down 6m t vs the March report and world soy production down 10m tons vs. last year while world soy demand up 12.6m tons vs. last year - this is a lousy time for world’s largest soy importer to pick a fight with the US,” comments Richard Feltes of RJ O’Brien.

Cotton stocks reduced

The USDA has revised its world cotton opening stocks downwards by 900,000 bales for April, following national changes in the figures for Brazil and Australia. But it has lifted global production for 2017/18 by 250,000 bales as a larger Brazilian crop more than offsets a decline in Sudan’s production.

Consumption now is about 400,000 bales lower in line with lower usage in India, Indonesia, and some smaller countries, despite rising consumption in Vietnam.

The April WASDE ending stocks for 2017/18 is 600,000 bales lower, with reductions for Brazil, Sudan, the US and Australia outweighing an increase for Pakistan.


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