MarketsFarm — The bulls were off and running Thursday after the U.S. Department of Agriculture (USDA) released its monthly supply/demand estimates, which showed underwhelming grain production and ending stock figures for the 2022-23 marketing year.
U.S. corn production was estimated at 13.73 billion bushels, 192 million below the lower end of trade expectations despite a higher average yield. Projected ending stocks totalled 1.242 billion bushels, below the average guess of 1.302 billion.
U.S. soybean production was projected to be 4.276 billion bushels, 45 million below the lower end of trade expectations, while the crop’s ending stocks are to be 210 million bushels, near the lower end of analysts’ pre-report estimates.
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U.S. wheat production was left unchanged at 1.65 billion bushels, but ending stocks are expected to be 268.4 million bushels, three million more than the lower end of trade expectations.
“We haven’t seen a decrease in demand offset lower production,” Sean Lusk, vice-president of Walsh Commercial Hedging Services in Chicago, said. “Not to mention, you have Argentina now buying (soybeans) from Brazil, you have inflationary gauges with the lower (U.S.) dollar this morning, aiding prices… You’re getting a bullish reaction, as you should.”
Over the past week, traders positioned themselves lower prior to the report, seemingly disregarding drought conditions for Argentine corn and soybeans as well as the effects of cheaper Russian wheat on the market.
The March corn contract gained more than 20 cents per bushel in reaction to the report, posting a 15-cent gain on the day at the close at $6.71 (all figures US$). The March soybean contract did the same to end the day with a 25.5-cent gain at $15.1825/bu.
March contracts for Chicago wheat and Kansas City hard red wheat also gained 20 cents per bushel from their lows ahead of the reports to close at $7.4275 and $8.35, respectively — gains of 2.75 cents and 12.75 cents from the previous day.
Lusk predicts that corn will move up to $6.76/bu. at the end of the week with the potential to go to $6.90/bu. in the near future. He also anticipates soybean prices to go higher, which could be tempered if there is no strong demand from China.
“(Argentina) has no carryover from last year (because during) their export program in the fall, they sold them all out. Now you have a situation where everyone’s relying on one country (Brazil). (The U.S.) has beans for sale, but there’s not a lot of sales,” Lusk said. “We could have a big move higher.”
However, he is also not making any predictions as to how prices will fare into next week and beyond.
“Next week, all bets are off, because if you have a bearish weather outlook in Argentina, maybe things slip,” Lusk said.
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.
