“USDA increased world wheat production in February, mainly due to an increase in yield in Russia. World trade increased slightly due to increased imports to Iraq and Turkey. World production of coarse grains in 2018/19 is projected at 1.5 million tons lower. And world corn production is declining on US, Mexico, and South Africa somewhat offset the increased yield in Argentina, China and Ukraine. The market reaction to the WASDE report practically confirms that the planned reports are less significant. One of the obstacles for the market recently has been the revival of the US dollar. Traders remained cautious amid uncertainty about the US trade agreement with China and the weather in Latin America. Trade negotiations between the US and China continue to worry the market.”

Elena Pitek (Neroba) Head of Analytics at Marcopolo Commodities SA

The February long awaited WASDE report was a kind of replay. The market was expecting new data from the report, but this turned out to be far from the figures shown by local agro agencies. Given the limited processing time for critical data still accumulated in 2018, WASDE will take much longer to comprehend and report on current global data changes. The market reaction practically confirms that the planned reports are less significant. One of the obstacles for the market recently has been the revival of the US dollar. Traders remained cautious amid uncertainty about the US trade agreement with China and the weather in Latin America. Trade negotiations between the US and China continue to worry the market, as the “big guys” will resume negotiations on 12/02/2019 in Beijing. No one expects much from the meetings, but still believes that ongoing discussions will keep the word on the market and reduce the likelihood of a purchase. Currently, US Trade Representative Robert Lightheiser and US Treasury Secretary Stephen Mnuchin will continue meetings in China February 14-15. President Trump will not announce that he agrees to meet with Chinese Prime Minister Xi.

World production of coarse grains in 2018/19 is projected at 1.5 million tons lower. The coarse grain outlook for increased production and consumption in February, as well as a slight decline in trade. World corn production is declining on US, Mexico and South Africa somewhat offset the increase yield in Argentina, China and Ukraine. According to forecasts, both in Argentina and in Ukraine the harvest will be a record. Ukrainian is even more than official data. World trade has changed minimally since the increase in imports to Chile and South Africa slightly offset the decline in Venezuela. Corn production in Argentina is growing due to higher expected area and yield, and heavy rainfall and favorable temperatures over the past two months increase yield prospects. South Africa is reduced because the heat and drought in January, especially in the western areas of production, reduce the yield prospects.

As for the bear side, world final stocks are projected at 309.78 million tons, which is 1 million tons more than in December. Ending stocks of corn are higher, mainly reflecting growth in Argentina and China. China will hold 207.8 million tons. The USDA left Brazil’s production figures at 94.5 million tons, Argentina - 46 million tons, which is 3.5 million tons more than in December. Argentinean analyst expects 45-47 million tons. CONAB is expected to update its Brazilian numbers on 12/02/2019. The forecast for corn in the US below. For ethanol, this reduction is based on the most recent data from the report on the production of cereal grains and by-products and the weekly data on ethanol production submitted by the Energy Information Administration for December and January.

World production of oilseeds this month is projected at 593.3 million tons. Soybean production accounted for most of the decline by 8.2 million tons to 361.0 million tons. Losses in the USA, Brazil and other South American exporters dominated. AgRural Consulting on lowered its forecast for Brazilian soybeans to 112.5 million tons, based on recent hot and dry conditions. This will be the smallest soybean crop in 3 years. But the USDA showed 117 million tons of soybeans. We will see, we will see. Production in Argentina was reduced from 0.5 million tons to 55 million due to the reduction in harvested area as per shower rains which is partially offset by an increase in yield.

Compensation of these losses led to an increase in sunflower production, which increased by 1.0 million tons to 51.5 million tons in Russia. World soybean imports fell by 1.0 million tons, while China’s forecast declined, offsetting growth in Argentina. Soybean exports decreased by 1.7 million tons, while exports from Brazil, the United States, Uruguay and Paraguay declined, offsetting growth in Argentina. World imports also declined, mainly by 2 million tons for China due to lower demand for raw materials. The USDA revised its forecast for Chinese soybean imports for the 18/19 year to 88 million tons (90 million tons in December, 94.4 million tons in annual terms and 103 million tons in US dollars according to the forecast on May 18). But the Chinese analyst shows only 83-87 MMT.

US oilseed production for 2018/19 is estimated down 1.5 MMT: smaller soybean, canola, peanut, and cottonseed crops are partly offset by an increase for sunflower seed. Soybean meal production is unchanged as the higher crush is offset by a lower extraction rate. Global 2018/19 soybean marketing-year ending stocks are lowered 8.6 MMT this month to 106.7 MMT, which is an 8.6 MMT increase over the 2017/18 estimate. In addition to croprelated changes, this month’s lower global ending stocks forecast reflects historical balance sheet revisions for Argentina (back to 2009/10) and Brazil (back to 1999/00). Anyway, Stock-to-Use Ratio for US is still twice up YtY. Global S/U also higher than it was last season, but lower that December expectation: 29% in 17/18 TY, 30.5% in Feb numbers vs 32.8% previous report.

USDA February crop report made unique adjustments in South America soybean ending stocks over the last 10 years, by cutting Argentina soybean stocks from 16.8 MMT to 8.4 MMT while increasing Brazil soybean ending stocks from 0.775 MMT to 1.152 MMT. It looks like US expected to stop Trade Ware and Brazil couldn’t sell as much as they want.

CONAB will release updated 2019 Brazil soybean production figures 12/02/2019. But for now Feb-Jan exports last year reached a record 84.2 MMT, 15.4 MMT above the previous record volume in 2016/17. This has reduced carryout stocks to 1.2 million tons, equivalent to a stocks/use ratio of less than 1%. Exports for the trade year ending September 2019 are expected up despite the smaller crop because of record exports observed for the October to January period. While a reduced supply of Brazilian soybeans available for export could enhance prospects for U.S. exports for the rest of the year and into 2019/20, a rebound in the Argentina crop will more than offset reductions in Brazil. China’s agriculture ministry said a new African swine fever outbreak was confirmed in the Hunan province. The outbreak was on a farm with 4,600 live pigs in the city of Yongzhou, infecting 270 of the animals and killing 171, the Ministry of Agriculture and Rural Affairs said. That is another signal from China for reducing consumption.

World wheat production in February increased due to the WASDE report, mainly due to an increase in yield in Russia. World trade increased slightly due to increased imports to Iraq and Turkey. Exports increased for Russia, Pakistan and Turkey, but reduced for Australia. But over the next few weeks, Russian exports will slow down due to high prices. We saw the market reaction to the previous GASC. After that, domestic wheat prices practically ceased to grow. But GASC purchased 300,000 tons of wheat for shipment from March 21 to March 31 from the USA, France and Ukraine. The Egyptian Ministry of Supply has strategic wheat reserves for more than five months. Russian ports reduced unloading by 6% in February. Also, the market is interested in a future meeting of Iran, Russia and Kazakhstan under an agreement on trade in wheat. Another issue that is being discussed behind the scenes is that the Russian Minister of Agriculture announced that he would meet with grain exporters on 02/11/2019 to discuss the prospects for their exports for the remainder of the marketing year.

The WASDE report shows an increase in wheat production in the United States. Winter crops of wheat are the lowest since 1909, even this did not make it possible to support the market. This was mainly due to cuts in feed and residual quantities, with quarterly stocks being updated, showing large stocks of wheat. Ending stocks in the world fell by 0.57 MMT compared to December figures.

The Russian Institute for Agrarian Market Research (IKAR) predicts wheat harvest in Russia in 2018-1919 at 76.5 MMT, compared with 72.0 MMT in 2017-18. At the same time, SovEcon expected 80 MMT. We will wait and see who is up.