The first WASDE report of 2019 has been published. The market was looking forward to the release as January was skipped due to the shutdown. Does the report live up to its expectations?
The program report from the United States Department of Agriculture (USDA) brings no surprises and is not expected to have a major impact on the market. Most notably, U.S. winter wheat acreage is estimated at 12,7 million acres, which is the smallest acreage since 1909. This is partly due to cold and wet conditions during sowing in the important production areas (Kansas and Oklahoma).
Positive news for the market
The above news also caused the wheat price to rise on the CBoT in Chicago on Friday, February 8. However, there was also news that did not support the price increase. Stocks in the United States (US) are higher than expected, despite the improved prospects for exports. Global wheat stocks fell by 0,6 million tonnes to 267,5 million tonnes.
The ministry estimates the recent corn and soy harvest to be lower than in previous forecasts. For corn, this is due to the fact that less product was used, which meant that stocks did not shrink as much as expected. The lower soy yield cannot fundamentally support the market either. Exports from the US are almost 0,7 million tons behind last year, as a result of the trade war with China.
Few surprises for soy and corn
The USDA did not come up with any major surprises for corn and soy, and the corn acreage in the US is probably growing little or not at all. Once again this has to do with the trade war between the US and China. Trade negotiations between the two countries will resume at the end of the week. If these turn out favorably, it could mean that farmers in the US will sow more corn.
The global corn area is expected to grow, especially due to the increasing area in Argentina, China and Ukraine. Higher maize production is also expected; the USDA estimates Brazil's corn harvest at 94,5 million tons, and expects an Argentine harvest of 46 million tons. This is clearly more than the 82 million and 32 million tonnes respectively in 2018.
Negative figures for the soy market
For the soy market, the WASDE report was dominated by negative expectations for 2019; the area, exports and stocks are expected to decline. Most importantly, the ministry estimates that Brazil's soybean harvest this year will reach 117 million tons. The expectation for the Argentine harvest is 55 million tons.
The above is significantly less than the 120,8 million and 37,8 million tons harvested in 2018, respectively. The lower Brazilian soybean harvest is mainly due to the drought in the south of the country.