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Futures mixed after mixed USDA reports

Agency raises corn and wheat carryout more than expected.

Grain futures are mixed this morning following USDA reports that didn’t stray too far from trade expectations. Corn and soybeans traded both sides of unchanged after initial selling, trying to firm from lower levels hit before the data was released. Wheat was down, but off session lows as well.

USDA raised its forecast of corn ending stocks by 200 million bushels, cutting demand across the board with reductions in usage for feed and residual, ethanol and exports. The increase in carryout to 1.035 billion bushels was around 50 million more than trade guesses, but the agency kept its forecast for average 2018 crop prices unchanged at $3.55 a bushel.

Wheat carryout also rose, increasing 32 million bushels to 1.087 billion. USDA cut demand for exports, feed and residual usage and seed, but raised the average cash price for the crop by 5 cents to $5.20. The trade expected a smaller increase in projected ending stocks, though it was unclear how USDA would incorporate results from its March 29 stocks report due to missing data from the government shutdown.

Soybean carryout dropped 5 million bushels to 895 million, while the trade expected a small increase. USDA said imports would be less than previously anticipated, keeping its forecasts for crush and exports unchanged from March 8 estimates.

Still, the U.S. looks to have plenty of competition for soybean exports. USDA raised its estimate of Brazil’s crop by 18 million bushels – the trade was looking for a modest reduction. Global supplies were raised slightly, though less than the trade anticipated.

The biggest numbers on USDA’s world forecasts came in corn, where the size of crops in both Brazil and Argentina went up. The agency raised its forecast of world carryout by 215 million bushels, one reason for the decline in projected U.S. exports.

While the reports keep old crop inventories at ample – if not burdensome – levels, a higher close today could mean the market is trying to pivot to new crop concerns. Weather remains an issue for corn, with another “bomb cyclone” blasting the western Corn Belt and more rain headed to the Delta too. While the trade won’t get too worried about lost acres yet, short covering by funds holding a record bearish bet in corn could provide impetus for a modest rebound. March corn is trying to reverse higher after posting a new contract low just before the report, then taking that out in a burst of high-frequency selling when the numbers hit.

If farmers do plant less corn, some of those acres presumably would wind up in soybeans. For now, however, soybeans are focused on trade talks with China, which appear to be hitting a make-or-break stage. USDA kept its forecast for total Chinese soybean imports unchanged, down around 6.5% from year ago levels. That’s a far cry from the 18% reduction in imports through February reported by Chinese customs officials. March data is expected to come out in the next day or two, providing a further glimpse into just what’s happening.

Spring weather also remains an issue in the wheat market. While spring wheat seeding reported Monday for last week was less than expected at just 1%, winter wheat ratings improved. Both hard and soft red winter wheat contracts sold off after the USDA report, though spring wheat bids were only off a penny or two.

The selloff in HRW came even though USDA raised its estimate of exports for that class by 10 million bushels, cutting projected sales for spring wheat, durum and white wheat.

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