In the December report of the US Department of Agriculture USDA, the corn stock is lower. This is due to a lot of demand from the biofuel sector. Stocks are only adjusted upwards for soy and wheat. However, analysts also see bright spots for the start of 2018.
In the WASDE (World Agricultural Supply and Demand Estimates) report for December, the USDA puts soy and wheat stocks higher, while corn falls. That comes as no surprise. Ethanol production in the United States (US) is running at full speed.
Record ethanol production
For the 2017/2018 season, which ends August 31, the USDA expects an ending inventory of 2,437 billion bushels of corn. That's a 50 million bushel reduction from the November forecast. This change is due to strong demand from production for biofuel.
Ethanol production has reached multiple weekly records in the US in recent weeks. The ministry does not tinker with corn exports. It remains unchanged at 1,925 billion bushels. However, the sales season has gotten off to a weak start. Traders expect this to pick up during the course of the season.
The ending stock of soybeans will increase slightly, from 425 to 445 million bushels. Exports will be reduced by 25 million bushels. Demand from the US is low. Less export is partly offset by increased use; for the purpose of sowing seeds, the USDA estimates.
Wheat volume continues to increase
Wheat increases from 935 to 960 million bushels in the latest report; more than was thought by the trade. The Canadian wheat harvest has been adjusted upwards by 3 million tonnes. This number is in line with figures provided by Canadians themselves. For Europe, the 2017 harvest has been increased by 1 million tons.
The USDA puts global corn supplies at 204,8 million tons. That was 203,86 million tons last month. Soy now stands at 98,32 million tons, which also means a slight increase. The US is making cuts for soy superpowers Brazil and Argentina, followed by more exports. Increases come from the US, Canada and EU. The Americans put wheat at 268,42 million tons, compared to 267,43 million tons in November.
All in all, the WASDE report brings few surprises for the sector and the trade. An increase in seed use for soy has been anticipated for some time. After all, an increasing area is not possible without an increase in seed consumption.
Volatility coming?
Wheat exports from the US and Europe continue to disappoint. Russia dominates the world market. Black Sea ports continue to export wheat at full capacity. Winter weather is not a spoilsport, allowing the export machine to continue running.
Rabobank also sees small bright spots. For example, they expect Black Sea exports to decline, less wheat to come from the dry southern states of the US and world supplies to decline. Weather models still show that La Niña will last at least until the first quarter of 2018, which could cause the market to react strongly to weather extremes.