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USDA reports provide few surprises

Markets go back to worrying about tariffs and trade.

Grain futures remained mixed today following USDA reports that as expected showed only slight changes from the agency’s November estimates. Today’s forecasts focused on supply and demand, with final estimates of U.S. corn and soybean production not due until January.
 
The biggest changes came in corn and wheat, where the government raised its projections for supplies leftover at the end of the marketing years. Corn carryout went up 45 million bushels, with only a small cut in imports offsetting a 50-million-bushel reduction in usage for ethanol – which was twice what we expected but easily supported by the 1% drop in demand for corn for the biofuel in the first quarter.
 
The projected average cash price for the crop was left unchanged at $3.60.
 
USDA also raised its forecast of wheat ending stocks by 25 million bushels, right in line with our forecast. A slow start during the first half of the marketing year left the agency’s previous estimate suspect after Russia kept selling grain longer than expected. Higher stocks in Canada and Russia weighed on the market despite another cut in the size of an Australian crop devastated by El Nino drought. Nonetheless, USDA raised its average cash price forecast for the 2018 crop by a nickel to $5.15.
 
No change was made to the estimate of U.S. ending stocks for the 2018 crop. As we expected, the agency passed on making any adjustment to its forecast of exports, waiting for China to actually move on its 25% tariffs. The government also made no change to its forecast of 2018 crop crush, despite record usage by processors in the first two months of the marketing year. The average cash price for the crop was unchanged, with the wide range -- $7.85 to $9.35 a bushel reflecting uncertainty in the market.
 
On the world stage, USDA raised its forecast for carryout of all three crops. Corn and wheat global estimates came in as we expected, but the total for soybeans rose nearly 120 million bushels due largely to a 55-million-bushel boost in Brazil caused by better yields in the Center-West.
 
Wheat futures sold off 5 to 7 cents in the wake of the report, sending the March SRW below the 50-day moving average. Corn held about a penny lower while soybeans overcame an early test lower to edge a penny or two higher.
 
While reports said China was studying a plan to cut its tax on U.S. auto imports from 40% to 15%, no news came out on its soybean sanctions, keeping buying under wraps. That uncertainty, plus the month-long wait until the next USDA report, could keep markets subdued into the holidays unless the trade logjam lifts.

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TAGS: USDA
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