This month’s WASDE report offered a few surprises,confirming that we remain in Stage #1 of the Golden Grain Cycle, where pricesare expected to chop sideways around cost-of-production levels. The primarytakeaway was a slightly bullish tilt in the corn balance sheet, contrasted by aburdensome domestic wheat supply and a neutral report for soybeans. Whileglobal stocks for all three major crops remain adequate on paper, solid corndemand, and a fairly tight domestic bean supply underlies the market’ssensitivity to weather, geopolitical tensions, and international tradedynamics.
Corn
The February WASDE report included a small snack for thebulls. The USDA projected U.S. ending stocks at 2,127 million bushels, asignificant 100 million bushel reduction from the previous month andconsiderably below the analyst average expectation of 2,215 million bushels.This revision was driven by a robust export pace, prompting the USDA toincrease its export forecast by 100 million bushels. Accordingly the domestic stocks-to-useratio tightened to 12.9%, a figure that suggests a much more snug supplysituation than previously thought, helping to lift front-month corn futures offtheir intra-day low.
The Report also leaned supportive globally. The USDA pegged WorldEnding Stocks at 289.0 million metric tons, down 1.9 million from last monthand below analyst estimates, drawing the global stocks-to-use ratio down to22.2%. While this level is historically adequate, it represents a multi-yeardowntrend, indicating that global consumption is outpacing production. Thecombination of a tighter U.S. balance sheet and shrinking global inventoriesprovides a stronger support for corn prices heading into the critical U.S.planting season.
Soybeans
In stark contrast to corn, the soybean report was anon-event, with projections aligning almost perfectly with market expectations.The U.S. balance sheet was left unchanged from the January report, with endingstocks holding firm at 350 million bushels. This figure was just above theanalyst average of 348 million bushels, confirming a stable domestic outlook.The U.S. stocks-to-use ratio remains at a tight 8.2%, but with no fresh inputs,the market's focus remains on the development of the South American crop andupcoming U.S. planting intentions.
The global soybean outlook was similarly steady. Worldending stocks saw a marginal increase to 125.5 million metric tons, primarilydue to a 2.0 million ton increase in Brazil’s production forecast thanks tofavorable weather. This nudges the global stocks-to-use ratio to 29.5%, whichis considered comfortable and is tracking just above the five-year average.With both domestic and global pictures holding steady, the soybean market isleft waiting for a new catalyst, likely to come from weather developments inthe Southern Hemisphere or planting decisions in the North.
Wheat
This month's report solidified the bearish sentiment hangingover the wheat market. Domestic ending stocks were increased to 931 millionbushels, coming in above the average analyst estimate and marking the largestU.S. wheat supply since the 2019/20 season. The build resulted from lower domesticfood use estimates. The U.S. stocks-to-use ratio increased to a burdensome45.9%, a six-year high that should continue to act as a significant headwindfor domestic prices.
The global balance sheet is less heavy but remainswell-supplied. While world ending stocks were trimmed slightly to 277.5 millionmetric tons, they remain at a five-year high, keeping the global stocks-to-useratio at an adequate 33.7%. Record production in countries like Argentina isfeeding strong global import demand, but it is not enough to meaningfully drawdown ample global inventories. The overarching theme for wheat remains one ofabundant supplies, which will likely cap any significant price rallies in thenear term.
Topics:
