With Limited Changes In US S&DS, Argentine Dryness The Focus

Market Analysis

With this year’s export sales running behind last year’s paces, expectations about USDA reducing both corn and soybean overseas demand are murmuring through the trade ahead of the upcoming December US supply and demand revisions. However, in a highly usual move, the USDA decided the leave the three major crops Decem-ber balance sheet unchanged last year at all levels despite strong early export sales. They decided to wait to see the final January crop levels before making changes. Having limited December supply/demand changes isn’t extremely surprising with no row crop output updates this month. This might also occur again given the building concerns about the current La Nina weather pattern potentially impacting Argentina’s and Southern Brazil’s crop outputs which could pick-up US exports yet this winter.

Corn export sales are behind last year, but they are only 81 million bu. behind the 5 year seasonal pace to hit this year’s 1.925 billion bu forecast. With Argentina weather iffy, no change in overseas demand seems likely. Given ethanol production being up 3% the first quarter of this crop year, a 50 million bu. increase in this demand still seems appropriate this month following our previous report. This suggests US corn stocks will be down 50 million to 2.437 billion bu. next week.

In soybeans, the US crush has been at or above expectations and the EPA recently kept its advanced biofuel levels for 2018 & 2019 at elevated levels suggesting no change in this domestic demand. Export sales are trailing their seasonal pace, but given Argentina’s current dry forecast, the USDA could again punt until next month on this demand outlook leaving bean stock unchanged.

Similar to corn and beans, wheat is behind its 2016’s export pace, but only 40 million behind its seasonal level to hit the USDA’s forecast. This suggests no change in this food grain’s export or stock levels this month.