So was the Wasde bullish for corn prices or not?
The grain proved the biggest winner of Chicago's big three
in the last session, after the US Department of Agriculture, in first estimates
for 2017-18 as revealed in its benchmark Wasde crop report, pegged US and world
stocks below market expectations.
Indeed, the immediate market reaction from many observers
"Bullish" was how Rabobank, for instance, termed the data,
adding that the report would "put extra focus on the potential for additional
downward revisions if US planting continues to be delayed".
At Texas A&M University, flagged that in the Wasde's
2017-18 estimates "not only is US production forecast to drop 1bn bushels,
foreign production is down 155m - this as total corn use is up 8.7m tonnes
"Lower production and higher use cuts the days of use on
hand at the end of the marketing year from a 78-day supply in 2016-17 to a
67-day supply, the lowest since 2013-14."
The "days of use" reading, another way of presenting the
stocks-to-use metric, is a key indicator of price potential, in showing the
extent to which buyers may be forced to pay up for supplies.
Degrees of comfort
But many other commentators had more nuanced views.
Wasde corn data, change on current estimate and (on market forecast)
US stocks, end 2016-17: 2.295bn bushels, -25m bushels, (-31m bushels)
US stocks, end 2017-18: 2.110bn bushels, n/a, (-12m bushels)
World stocks, end 2016-17: 223.9m tonnes, +920,000 tonnes, (+580,000 tonnes)
World stocks, end 2017-18: 195.27m tonnes, n/a, (-124.45m tonnes)
Sources: USDA, Reuters, Agrimoney.com
At Commonwealth Bank of Australia, Tobin Gorey termed the
data "ostensibly bullish" for corn, flagging, as Agrimoney.com reported, that they
showed a an end to a four-year spell of rising stocks.
"The global feed grain market is exiting a phase that
started in season 2013… the season when the feed grain market started the
process of catching up with demand. and so more than halved corn prices from
their 8$ highs in 2012," Mr Gorey said.
Next season "looks likely to be different at least in terms
of direction," a factor which means "it is now more likely we have seen the
lows in corn prices for a while.
"We do not though expect a big, sustained rise in prices. There
is still a lot of corn around now.
"While supply is likely to be less comfortable, it is likely
to remain comfortable."
'False hope for bulls'
At RJ O'Brien, Richard Feltes, cautioned over the dependence
of the weak world stocks number on an accelerating drawdown in Chinese
inventories (as reported elsewhere on Agrimoney.com).
The "20m-tonne decline in 2017-18 Chinese corn stocks is a
false hope for bulls," he said.
"Major shifts in internal Chinese grain stocks do not have a
material impact on global grain trade."
What was of "more immediate importance is the improving US
weather pattern, especially warmer temperatures, that signals improved
prospects for planting/emergence in coming days" in the US Midwest.
There was "nothing" in the Wasde "to jar large corn shorts",
Mr Feltes added, although in price terms the "recent low end of range will hold
until US planting is nearly complete".
Certainly, corn futures in early deals failed to build on
their gains of the last session, easing 0.1% to $3.73 ½ a bushel as of 09:20 UK
time (03:20 Chicago time), and shying away from a confrontation with its
100-day moving average, at a little over $3.74 a bushel.
Whether it can break above that line may depend, besides on
further Wasde analysis, on the US weather outlook and the results of further data
due later, with Brazil to unveil updated crop forecast, which will be watched
for any changes to the figure for the safrinha crop.
Furthermore, the USDA will later unveil weekly US export
sales data expected to come in at 700,000-900,000 tonnes for corn for 2016-17,
and 50,000-250,000 in advance orders for next season.
That compares with figures of 771,563 tonnes and 24,131
tonnes respectively last time.
There was some debate over the Wasde in soybeans too, for which the 2017-18 data were broadly viewed as "neutral"
Wasde soy data, change on current estimate and (on market forecast)
US stocks, end 2016-17: 435m bushels, -10m bushels, (-3m bushels)
US stocks, end 2017-18: 480m bushels, n/a, (-83m bushels)
World stocks, end 2016-17: 90.14m tonnes, +2.73m tonnes, (+2.61m tonnes)
World stocks, end 2017-18: 88.81m tonnes, n/a, (+2.22m tonnes)
Sources: USDA, Reuters, Agrimoney.com
While the US stocks figure for the close of the season came
in well below market expectations, this factored in a 100m-bushel rise to
2.15bn bushels next season which some commentators viewed as suspect,
particularly given the strong competition with South America the USDA noted in
Joe Lardy at CHS Hedging terming the data "very interesting",
noted that for next season "US exports were heavily slashed to the second
lowest level in the last five years and 350m bushels" down year on year.
"Soybean exports were raised to the largest level ever.
"If corn exports are being lowered from extra South American
production than why wouldn't that logic apply to beans?"
At Country Futures, Darrell Holaday was more outspoken,
flagging "issues" with the soybean estimates it termed "creative".
"USDA does not like to make major news with the [first 2017-18
forecasts] and they simply manage the demand numbers in order to not to provide
a shocking number," he said.
"That is what they did hereby increasing crush 25m bushels
from the current year number and exports 100m bushels.
"They did that in order to manage the ending stocks projection."
Still, soybean futures
added 0.4% to $9.74 a bushel for July delivery, rising back above their 40-day
moving average, given help by the ideas of better Midwest sowing weather, which
cut the chance of farmers switching area to the oilseed from corn.
(Soybeans can be slightly later seeded, so tend to pick up
area in years of slow early plantings.)
Furthermore, elsewhere in the oilseed complex, palm oil provided support, recovering
from early losses to stand 1.4% higher at 2,664 ringgit a tonne after the Malaysian
Palm Oil Board pegged Malaysian inventories of the vegetable oil last month
below market expectations. (Agrimoney.com will report more on this later.)
In Chicago, rival soyoil
gained 0.8% for July to 32.54 cents a pound.
'Passed the low point
As for wheat, it
sided with soybeans in showing modest gains, adding 0.5% in Chicago to $4.33 ¾ a
bushel for July delivery.
Wasde wheat data, change on current estimate and (on market forecast)
US stocks, end 2016-17: 1.159bn bushels, unchanged, (-3m bushels)
US stocks, end 2017-18: 914m bushels, n/a, (-20m bushels)
World stocks, end 2016-17: 255.35m tonnes, +3.09m tonnes, (+3.19m tonnes)
World stocks, end 2017-18: 258.29m tonnes, n/a, (+12.14m tonnes)
Sources: USDA, Reuters, Agrimoney.com
There was less controversy over the Wasde estimates for
2017-18 in the grain, seen generally as slightly bullish, although some took
issue with the wheat yield of 47.2 bushels per acre as being too low.
"The main thing we took from the report though is that US
wheat supply is on the wane," said CBA's Tobin Gorey.
"And with that we can have greater confidence that we have
passed the low point for wheat [prices]."
Hard vs soft
Benson Quinn Commodities said that "the USDA projections for
winter wheat production and ending stocks were well with the trade's margin of
"The negatives from the report continue to be ample supplies
of domestic and global wheat."
Terry Reilly at Futures International, noting that the forecast
for US hard red winter wheat output next year fell short of market expectations
by 32m bushels, said that in the last session "Kansas City wheat futures should
have ended higher, in our opinion, on this assessment of production".
However, Kansas City-traded hard red winter wheat continued to
underperform on Thursday too, adding 0.3% to $4.40 ¾ a bushel for July.
In New York, cotton
futures were little changed, easing 0.1% to 76.41 cents a pound, as the market continued
to weigh Wasde data showing bigger than expected US production and stocks at
the close of 2017-18, but a smaller-than-forecast world inventory number.
"The reality was
worse than worry, at least in terms of US forecasts," CBA's Tobin Gorey said,
with US cotton stocks forecast by the USDA as ending 2017-18 at 5.0m bales,
some 400,000 bales ahead of expectations.
"The USDA's global numbers were friendlier but were less
At a global level, the USDA pegged year-end inventories at 87.1m
bales, some 2.7m bales below market expectations.
"US cotton futures are principally concerned with US cotton,"
Mr Gorey said, adding that "the momentum in cotton futures – July or December –
"Investors are heavily long and have probably lost their
rationale for being so. A rush to the exits is looking more likely."
However, Rabobank was less downbeat, terming the data "slightly
bearish", adding that after "exceptional summer heat" it saw potential for a
downgrade to the Australian production number for 2016-17 of 4.4m bales.