USDA now see Europe's wheat exports down; corn market closes 12 cents higher

Soycomplex

Beans closed mixed. Support came from weekly export sales of almost 1.8 MMT, versus trade ideas for sales of 1.0-1.5 MMT. These were mostly for unknown destinations (994,400 MT) and China (658,400 MT). A total of 822,900 MT in sales were carried over from the 2014/15 marketing year, which ended August 31. Exports for the part week ending August 31 of 187,500 MT brought accumulated final exports for 2014/15 to 49.8 MMT, up 12 percent from the prior year’s total of 44.5 MMT.

The September WASDE report was expected to show a revised downwards US soybean production total of around 3.85 billion bushels versus the 3.916 billion bushels projected by the USDA last month. In fact what the market got was an increase to 3.935 billion bushels with a national average yield forecast of 47.1 bu/acre.

The average trade guess for yields was 46.4 bu/acre, down 0.5 bu/acre from last month. That took the wind out of the bullish impetus provided by robust export sales. Still, the market managed to finish closer to the highs of the day than the lows, helped by a firmer corn market. Despite this week's strong export sales, US shippers have only got 34% of the USDA's target for the 2015/16 season on the books versus 48% this time last year.

Back to the WASDE report, old crop US soybean ending stocks were cut to 210 million bushels from 240 million a month ago and around 20 million lower than the average trade guess. New crop ending stocks were pegged higher than the average market expectation of 410 million bushels at 450 million, although that was down 20 million on a month ago it wasn't as large a cut as expected. China's 2015/16 imports were left unchanged at 79 MMT, and there were no changes to output or exports for Brazil, Argentina or Paraguay in 2015/16. World 2015/16 ending stocks were estimated at just under 85 MMT versus an average trade guess of 86.21 MMT and versus 86.88 MMT a month ago. Sep 15 Soybeans closed at $8.87 3/4, up 3 1/4 cents; Nov 15 Soybeans closed at $8.74 1/4, up 1/4 cent; Sep 15 Soybean Meal closed at $314.10, up $2.70; Sep 15 Soybean Oil closed at 26.58, down 29 points. For the week Sep 15 beans were 10 1/2 cents higher, meal was up just 20 cents and oil rose 14 points.



Corn

The market closed around 12 cents higher on the day and with good gains for the week. Weekly export sales of 411,200 MT were less than stellar, although they fell within the 300-600,000 MT range of trade estimates. A total of 1,427,100 MT in sales were carried over from the 2014/15 marketing year, which ended August 31. Exports for the part week ending August 31 of 640,900 MT brought accumulated exports for the 2014/15 season to 45.85 MMT, down 3 percent from the prior year’s total of 47.38 MMT. Exporters typically have 29% of the USDA's target for the season ahead on the books by the end of the first week of a new marketing year.

Currently that figure is only 19%. In it's monthly WASDE report the USDA lowered US 2015 corn yields to 167.5 bu/acre, putting total US production at 13.585 billion bushels. The average trade guess was 167.6 bu/acre and 13.559 billion, so these were pretty much spot on with trade thinking. The trade is also thinking that there will be further yield and production decreases to come down the line. As far as inventories go, old crop US ending stocks shrank by 40 million bushels, and new crop ending stocks were down 121 million from the August report.

The average trade guess had been for reductions of 11 million on old crop and 70 million on new crop. 2015/16 carryout of 1.592 billion bushels is lower than the average trade estimate of 1.643 billion. On a global level, the USDA had old crop ending stocks at 197.2 MMT, falling to 189.7 MMT in 2015/16. Trade estimates had pegged these at 197 MMT and 195 MMT, so I guess you could say that the new crop number is a bit friendly. The USDA were pretty much unchanged with their production estimates in most countries around the world: Brazil, Argentina, China, Ukraine etc, but slashed Europe by 4.3 MMT from a month ago to 58 MMT.

"Yield is estimated at 6.16 MT/hectare, down 6.3 percent from last month and 21.9 percent from last year’s record," they said. Corn production potential was cut in France, Germany, Romania, Poland and the Balkans. Europe will now need to import 16 MMT of corn this season, 1 MMT more than was estimated a month ago and 7 MMT higher than in 2014/15. Brazil and Ukraine both got a 1 MMT hike in their corn export potential. Production was seen unchanged in Brazil, Argentina, China, Ukraine and Russia. It's worth noting that average corn yields in Ukraine were left unchanged at 6.59 MT/ha. With admittedly only a very small area cut so far, the Ukraine Ag Ministry say that these are currently only averaging a little over 4 MT/ha. Sep 15 Corn closed at $3.74 1/2, up 12 3/4 cents; Dec 15 Corn closed at $3.87, up 12 3/4 cents. For the week Sep 15 corn gained 25 cents.

Wheat

The market closed mostly higher, catching a ride on the coat-tails of rising corn prices, despite a pretty bearish USDA report. Weekly export sales of 290,400 MT failed to impress, although they just about fell within modest pre-trade estimates of 250-500,000 MT. Trade estimates had US 2015/16 all wheat ending stocks estimated at an average 865 million bushels, from within a range of estimates of 850-885 billion, and versus the USDA's August estimate of 850 million. Today's USDA number was in fact 875 million. World 2014/15 wheat ending stocks are seen little changed at 209.84 MMT, ditto global 2015/16 carryout which was estimated at an average 221.90 MMT. The USDA today gave us 211.3 MMT and 226.6 MMT, so both came in higher than the market was expecting, and the new crop figure is in fact an all-time high.



Russia and Ukraine both got a 1 MMT rise in output from what was suggested a month ago, with their wheat crops now coming in at 61 MMT and 27.5 MMT respectively. Europe did even better than that with a huge 6.3 MMT increase in production to a second-highest ever 154.1 MMT. Average yields in Europe were increased from 5.59 MT/ha to 5.80 MT/ha and the harvested area estimate was also increased by 100,000 ha. The USDA forecast 2015/16 Canadian wheat production at 25.0 MMT, down 5.7 percent from last month and down 15 percent from last year "due to adverse growing conditions." Wheat consumption in the EU-28 was raised 1 MMT, and that in Russia increased by 0.5 MMT. EU 2015/16 wheat exports were increased 1.5 MMT from a month ago to 32.5 MMT, and Ukraine's were increased by 0.5 MMT to 13.5 MMT. Russia's were left unchanged, along with Australia, Canada and Argentina.

It is noteworthy that the USDA now see Europe's wheat exports down only 8% versus the previous record total achieved last season, but that soft wheat export licences are currently running 30.5% below where they were this time last year.

Presumably the USDA see these picking up significantly in the second half of the season? In other news, Ukraine said that they'd exported almost 7 MMT of grains so far this season, including 3.43 MMT of wheat, 1.33 MMT of corn and 2.18 MMT of barley. Russia said that it's 2015 grain harvest was 68% complete on 32 million ha producing a crop of 80.7 MMT to date. The wheat harvest there is 72.3% complete on 19.4 million ha for a crop of 53.9 MMT so far. Winter grain plantings of mostly wheat for the 2016 harvest are now 37.3% complete on 6.4 million ha, which is 400,000 million up on a year ago at this time. Sep 15 CBOT Wheat closed at $4.75 1/2, up 7 1/2 cents; Sep 15 KCBT Wheat closed at $4.59, up 5 1/2 cents; Sep 15 MGEX Wheat closed at $4.87 3/4, down 3 1/2 cents. For the week that puts Chicago wheat 17 3/4 cents higher, with Kansas up 10 1/2 cents and Minneapolis gaining just 1 1/2 cents.