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USDA lowers soy exports, market reacts bullishly

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The United States Department of Agriculture (USDA) Thursday released February’s World Agricultural Supply and Demand Estimates (WASDE). A market strategist discusses the report’s findings and impact on prices.

Traders estimated minimal changes to U.S. corn ending stocks. Brian Grossman, market strategist with Zaner Group, reports USDA lowered corn ending stocks.

“Corn came in with stronger exports, up 125 million bushels,” Grossman said. “That is pulling our ending stocks down to 2.352 metric tonnes. (That is) still a pretty large number. We saw Argentina production falling by 3 million metric tonnes. Globally, we’re down by almost 3.5 million metric tonnes, so that’s supportive. Still a lot of corn out there, but going in the right direction.”

Traders also predicted minimal changes to U.S. wheat ending stocks. However, USDA greatly reduced export demand for wheat. Grossman says USDA’s decrease in wheat demand is suppressing trade, despite the drought in the Plains.

“Even with the drought in the Plains, we are trading 4 ½ lower in the Chicago wheat, down 6 ½ in Kansas wheat. That is due to lower exports here,” Grossman said. “They did bump us up a little in food demand, but exports getting slashed by 25 million ultimately pushed U.S. ending stocks up by 20 million. We also saw global inventories change slightly down, almost 2 million metric tonnes. (There is) still enough wheat to go around.”

Traders estimated a 16 million bushel increase in U.S. soybeans. USDA reduced soybean ending stocks by 60 million bushels. Grossman says the soy market has reacted with great stride. He adds traders were taken aback by the market’s reaction to these numbers.

“March soybeans up 6 ¼, and that is the big surprise here. The USDA slashed U.S. exports by 60 million bushels, pushing ending stocks over the 500 million mark – now estimated at 530 million. (We are) responding a little bit bullishly here. That could be in response to South American numbers,” Grossman said.

Traders estimated a wash in South American soybean production. USDA confirmed trader estimates with reduced Argentine production and increased Brazilian production.

Grossman says soymeal futures are pushing soybean futures, as Argentina is the world’s largest soymeal exporter. He encourages growers to take advantage of this rally.

“Take advantage of these rallies. While we like to look at the drought monitor and say, ‘Wow, it is really dry out there,” we have to remember that we’re not far from breakeven and a few well timed rains could really put some pressure back on this market,” Grossman said.