Farming News - USDA surprise cut in US soybean forecast harvested acres
USDA surprise cut in US soybean forecast harvested acres
The USDA report released on Thursday (11 Oct) produced a few surprises for the markets, mainly on corn and soybeans, although for wheat it was another case of what USDA didn’t do, rather than what it did.
The corn and soya news resulted in speculative buying, pulling corn and soybean futures higher. Although wheat initially followed, buying interest quickly waned, with Chicago wheat ending lower on the day.
For the wheat complex, ending US wheat stocks were raised to 26mln t, as higher production, imports, and lower domestic usage contributed to the increase.
On the global picture, crop estimates were lowered for Australia and Russia, but left unchanged for Canada, the EU and China.
USDA again failed to address the trade issue over global exports and, although Australian exports were lowered based on the reduced crop, both Russian and EU projections were left unchanged.
EU futures are up about €2/t on the week, with markets very quiet prior to the USDA release last night. Fundamentally, not a great deal has changed, with soft wheat exports to non-EU countries still trailing last year by almost 25%.
This week the French farm ministry lowered the 2018 wheat crop, but raised its non-EU export projection. Reports of export longs, both in France and Germany which are looking to offload wheat with no apparent buying increase, continues to circulate around the market.
In addition, if the French are that confident over their exports, why are they sending a trade body to Algeria, who recently have been engaged in talks with Russia over future trade?
In the UK, the market continues its sluggish tone. November futures are starting to look technical, with the first tender day fast approaching, while the May 19 position is about £1.50 down on the week.
The market has been pressured by the strength in sterling, seen linked to more positive vibes over a potential Brexit deal being achieved. Marketwise, end-users remain reluctant to extend cover, especially in the deferred positions, with growers still concentrating on fieldwork rather than marketing.
David Sheppard Manager of Gleadell comments:
In summary, the USDA report gave some support to the corn and soybean markets, but for wheat it’s a case of not yet!
Potential long-term support is the perceived increase in export demand for US wheat, as supplies in other competing regions decline. However, until evidence of this shift to the US is confirmed in actual sales and shipments, one could expect the market to continue trading in a narrow range.
With US funds holding a relatively small short position, it remains unclear what their next directional move will be. However, if we start to see the perceived shift, it may light the blue touchpaper for a sustained rally, which given the overall tight EU and UK balance scenarios, would provide price support.
The October USDA report brought us some surprises. We expected to see a big jump in US soybean carryout, but the USDA blindsided us all with a cut in forecast harvested acres.
Whilst yields were raised, the overall net effect was negligible and allowed USDA to keep the carryout figure in the US below 24.5mln t, when many were looking at 27+mln t.
This allowed the market to find some support, but with an increase in the global carryout figure and the ongoing trade issues between US and China, it is difficult to sustain a rally without some change in US/China relations.
Old crop rapeseed futures prices in Europe have been lacklustre, with little engagement from both sides of the market.
Crop conditions in Australia point to a significant year on year decline in production, with many now suggesting the crop will struggle to be much above 2mln t. In Canada, harvest continues to be adversely affected by rain and snow, and the crop is also going backwards.
In Europe the focus has been on the dry weather and poor crop establishment. We have heard anecdotal evidence suggesting the crops in France and Germany could fall by a combined 1mln t. With the additional impact of flea beetle, the UK harvested area could be down by as much as 20-25%.
On paper the global rapeseed market looks supported, but rapeseed is part of a much wider global vegetable oil complex that will be led by the soya market, which is fair from straightforward.