The United States Department of Agriculture might have deflated growing optimism that increased U.S. wheat exports, and perhaps stronger wheat prices, were just around the corner.
The USDA’s monthly supply and demand reports released Nov. 9 were negative for wheat and oilseed prices.
The USDA did not change U.S. wheat production, but it shaved its forecast of exports to 1.1 billion bushels down from 1.15 billion in the October report.
U.S. wheat exports to date are slow and had been lagging the pace needed to reach the USDA’s export target, so the reduction in this month’s export target is based on experience.
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But a belief had been building among traders that with Black Sea region exports expected to wind down in the coming weeks, U.S. exports would start to increase. Apparently the USDA will wait for evidence before hitching on to this bandwagon.
The USDA also lowered its estimate of global wheat production by 1.62 million tonnes to 651.43 million tonnes. As expected, it cut its forecast of Australian production to 21 million tonnes, a reduction of two million due to dry growing conditions.
It kept its outlook for Argentina at 11.5 million. Flooding there might cause that number to be reduced in later reports.
The USDA also lowered its expectation of global consumption and the result was an increase in its forecast for ending stocks, which climbed to 174.18 million tonnes, up 1.18 million from October. That was not positive for a wheat rally.
The latest USDA report made only minor revisions to its supply and demand estimates, but there was not much other news to trade on so it was closely watched.
Soybeans and canola were already on a gradual downtrend on expectations of a bumper South American soybean crop and the USDA report punched values lower.
The USDA did not change its soybean production forecasts for Brazil and Argentina. Significant rain finally reached dry areas of Brazil last week, improving the prospects for a successful seeding season.
Excessive rain in Argentina has raised the question of whether farmers there will be able to seed all the corn and soybean acres that are forecast.
The bearish aspect of the USDA report was the increase in the U.S. soybean crop to 2.971 billion bu., a little more than the trade expectation of 2.892 billion bu.
The USDA increased its forecast for crushing and exports but not enough to prevent a slight increase in soybean ending stocks to 140 million bu., up from 130 million in the October report. The trade expected 131 million.
The question now is: will the lower prices that flowed from the bearish USDA report spark increased demand? Since the peak on Sept. 4, soybeans are down 18 percent. Canola peaked Sept. 14 and since then is down about 10 percent.
Farmers have generally enjoyed good cash flow and are in a strong position to keep their bins closed until buyers offer the right combination of price and basis.
