South American focus in latest WASDE revisions: Grain market daily

• Old crop UK feed wheat futures prices (May-23) closed yesterday at £240.20/t, up £0.70/t from Tuesday's close. New crop futures (Nov-23) closed at £232.95/t, gaining £0.70/t over the same period.
• UK feed wheat futures continue to follow upward movements to Paris milling wheat futures, as strong demand continues for EU origin wheat.
• Paris rapeseed futures (May-23) closed at €554.25/t yesterday, up €0.75/t from Tuesday's close.
• The USDA's WASDE release yesterday included large cuts to Argentina's corn and soybean harvests, coming in lower than initial trade estimates (read more on this below). Argentina is set to experience more heat and dryness over the next two weeks which has led to Chicago soybean futures swinging between losses and gains in Asian trading this morning, with US wheat and corn markets also subdued since the USDA publication (Refinitiv).

Yesterday, the USDA’s latest monthly WASDE (World Agricultural Supply and Demand Estimates) report was released. As mentioned in yesterday’s GMD, the main focus ahead of yesterday’s report was on South American maize and soyabean production, with analysts predicting cuts to Argentina’s output. So, how did the report compare to trade expectations?

Maize

Following extreme drought in Argentina, analysts were expecting the country’s maize production figure to be slashed in yesterday’s report. In a Refinitiv pre-report poll, the average trade estimate for Argentina’s maize output sat at 48.5Mt for the 2022/23 season. In actual fact, the figure was revised down to 47Mt in yesterday’s report, 5Mt lower than January’s estimate. However, the latest USDA estimate is 2.5Mt higher than the Buenos Aires Grain Exchange’s estimate, with the full impact of the drought yet to be fully known.

While Argentina saw a cut in their production forecast, Brazil’s estimate was unchanged at 125Mt. The combined maize output estimates from the two countries this season is 172Mt, a 4% rise on the year, and up 19% on the five-year average. 

On the back of the WASDE release, Chicago maize futures (May-23) ended yesterday’s session at $226.24/t, gaining $1.28/t from Tuesday’s close. However, any major gains in maize markets were limited, due to upward revisions to US maize ending stocks. Maize used for ethanol in the US this season was reduced in yesterday’s report, seeing US maize ending stocks revised up 630Kt. The large Brazilian crop will also likely weigh on global maize markets moving forward. However, further cuts to Argentinian production could be seen if we don’t see improved weather conditions in the country.

Soyabeans

As the world’s third largest producer of the oilseed, Argentina’s soyabean production was also a watchpoint in yesterday’s report. The USDA revised their figure down to 41Mt, 4.5Mt lower than January’s estimate, and 1.34Mt lower than the average trade estimate in a Refinitiv pre-report poll. The revised figure is now also aligned with the Buenos Aires Grain Exchange production estimate. Having said this, Huatai futures analysts have said that if the dry weather in the country persists it will be difficult for Argentina to produce more than 40Mt of soybeans this season, suggesting the figure could be cut further if conditions do not improve.

As with maize, while soyabean production in Argentina has been revised down, Brazilian production remained unchanged at a record 153Mt, in line with trade estimates. Combined soyabean output from Brazil and Argentina this season is expected to reach 194Mt, up 12% on the year, and 11% higher than the five-year average.

In terms of market movement, Chicago soyabean futures (May-23) gained $1.28/t yesterday, closing the session at $556.15/t. While gains were seen on the back of larger than expected production cuts, lower US soyabean meal disappearance and a higher soyabean meal extraction rate saw greater US ending stocks (up 410Kt), capping any major gains. Looking further ahead, Argentinian weather remains something to monitor, though now Brazilian soyabean harvest has begun, we could see some pressure from the bumper crop coming onto the market.

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