Free Commentary

By: Dan Hueber –

The Monday morning bullish celebrations have turned into Tuesday mourning for those still bullish as grain and soy markets have turned south once again.  This really should come as no surprise as positive news was really quite sparse.  Yes, export inspections were solid for corn at 56.9 million bushels, the 4th highest of the marketing year, and wheat was slightly above the average pace at 19.7 million but beans were a yawner at 33.9.  Regardless, with weather/transportation issues in Brazil growing less problem-some and more and more services pushing South American production estimates higher, there was little for a struggling bull to hang onto.  AgRural now projects a Brazilian bean crop of 107 MMT and Celeres is already out there with a whopping estimate of 109.6 MMT.  Dr. Cordonnier also bumped his estimate 1 MMT to 106 million.  The soybean crop in that nation is estimated to be 45% harvested which is behind that pace that many had expected this year due to the early planting but regardless, that is still 4% ahead of last year and 7% ahead of average for this date.  Slightly difficult to find the silver lining in those clouds.  To add just a bit of icing to the bearish cake, a Chinese state think tank now projects that corn imports for the nation will drop to 1 MMT. This would be half of their previous projection and one-third of what the USDA has dialed in.

I suspect at least part of the Chinese revisions are being prompted but the ongoing reforms in that nation to try rid itself of the failed stockpiling and storage problems.  Advisor Chen Xiwen, now estimates that corn inventories are down to 230 MMT, compared with 250 six months ago and the government continues to search for ways to increase demand and remove the long held minimum price restrictions.  Expansion of ethanol is being encouraged with a goal of increasing production from the current 2 million tonnes to over 4 million by 2020 as well as attempting to increase the manufacture of corn sweeteners. Even using corn to make translucent film for greenhouses is being promoted.   Many analysts currently believe that Chinese production versus usage have basically come in line with each other so expanding non-traditional use combined with the normal expansion of population/income, i.e. diets, should be a longer-term positive for the global corn market.

We still have a few more days until the March supply/demand report and survey estimates continue to be released.  The WSJ comes up with ending stock estimates of 2.320 billion for corn, 414 million beans and 1.136 billion wheat.  This compares with the February estimates of 2.320, 420 and 1.139.  World ending stocks are expected to be come in around 218.6 MMT for corn (217.56), 81.3 MMT beans (80.38) and 248.8 MMT wheat (248.61).