All eyes were on international production in Thursday’s February 2024 World Agricultural Supply and Demand Estimates report from USDA. But domestic usage had a few surprises of its own for U.S. corn, soybean and wheat prices.

Most significantly, USDA made only minor downward revisions to the Brazilian soybean crop in Thursday’s reports, taking a 0.7%-0.8% gain in the soybean market this morning and turning it into a 0.2% price loss immediately following the report. Brazilian corn production saw more significant reductions, but those struggled to compete against lower food and industrial consumption of corn in the U.S.

“The markets were banking on USDA making bigger cuts to Brazil’s soybean crop,” according to Farm Futures grain market analyst Jacqueline Holland. “But USDA tends to err on the conservative side when calculating Brazilian crop production. It also closely reconciles shipping volumes with production to ensure accuracy.”

“I found it telling that USDA actually increased Brazil’s anticipated 2023/24 shipping volumes in Thursday’s report,” Holland continues. “Early harvest yield reports have been widely varied so far from Brazil. Brazilian soybean growers are just getting into later-planted crops, which likely benefited from more rainfall during peak pod fill periods and could result in higher yields by the season’s end.”

Wheat prices struggled to overcome bearish pressure at play earlier in the trading session, extending price losses amid smaller wheat imports from top buyers in China, North Africa, and the Middle East while higher export volumes were added to Australia and Ukraine’s balance sheets. Human food consumption of U.S. wheat also was cut, exacerbating bearish pressures at play in the U.S. wheat markets.

Corn

USDA made very little changes to its corn outlook this month, lowering corn used for glucose and dextrose by 10 million bushels. That left ending stocks up 10 million bushels from January, with 2.146 billion bushels. That bucked analyst expectations, which was that stocks would slide slightly lower, to 2.162 billion bushels.

The season average farm price held steady at $4.80 per bushel.

In South America, USDA held Argentina’s production potential steady, at 2.165 billion bushels. Analysts were expecting to see a modest rise to 2.189 billion bushels. In Brazil, fell from 5.000 billion bushels in January down to 4.882 billion bushels, versus the average trade guess of 4.894 billion bushels.

One of the items that provided Holland with the biggest surprise was USDA’s downward revision of Brazil’s corn crop. The markets were expecting cuts, but USDA’s estimate came in slightly lower than analysts had been expecting prior to the report’s release.

“This tells us that Brazil’s safrinha crop may be facing larger climate challenges (dry soils) and unfavorable yield windows that could be discouraging farmers from expanding acreage this year,” Holland says. “The smaller acreage will result in a 2% decrease from previous estimates in 2023/24 Brazilian corn production, as well as a 4% decrease in anticipated 2023/24 Brazilian corn exports.”

The U.S. could be poised to take advantage of the smaller Brazilian corn export volume when our shipping season ramps up in the upcoming months, Holland adds. But price will play a critical factor and if U.S. corn can’t compete with Brazil or Ukraine, it seems likely that Ukraine will step in to compete with U.S. corn on the international market.

“The other South American surprise? USDA left Argentina’s corn and soybean production volumes unchanged from previous estimates,” Holland says. “Argentina has endured a hot spell in recent weeks and while rain relief is finally on the way, it is likely that some heat damage has taken the top end hopes off of Argentine yields.”

Regardless, Argentina is still on track to ship double the volume of corn into international channels this year compared to a year ago, Holland concludes. And its soybean shipping volumes are forecast to be 10% higher than last year. Even with some late season challenges, Argentine corn and soybean producers are still in better shape than a year ago.

Global stocks moved from 12.804 billion bushels in January down to 12.680 billion bushels. Analysts were expecting to see a more modest decline to around 12.757 billion bushels.

Soybeans

USDA made some changes worth noting in soybean supply and demand. In particular, exports trended 35 million bushels lower month-over-month to 1.72 billion bushels, which the agency attributes to slow pace of shipments in January and strong competition from Brazil. Ending stocks moved 35 million bushels higher, to 315 million bushels. That was higher than the average trade guess of 280 million bushels.

Meantime, the season average price fell by a dime to $12.65 per bushel. Soymeal prices held steady at $380 per short ton, while soyoil prices faded 3 cents lower to 51 cents per pound.

South American production showed Brazil’s potential sliding from 5.768 billion bushels in January down to 5.731 billion. But analysts were generally expecting to see bigger declines after offering an average trade guess of 5.627 billion. In Argentina, production estimates held steady at 1.837 billion bushels.

“There is still plenty of time in the Southern Hemisphere growing season for USDA to make further adjustments to South American crop production,” Holland says. “As shipping volumes ramp up, we will also see more clarity in these estimates. For now, it is safe to continue assuming that Brazil will harvest another big soybean crop this year.”

World ending stocks increased modestly from 4.210 billion bushels in January up to 4.263 billion. In contrast, analysts were expecting a decline, offering an average trade guess of 4.133 billion bushels.

Wheat

USDA’s fresh outlook for wheat includes “stable supplies, lower domestic use, unchanged exports, and higher ending stocks.” Exports held steady at 725 million bushels after offsetting changes between hard red spring and hard red winter classes. Ending stocks moved 10 million bushels higher to 658 million, with analysts expecting a modest drop to 647 million bushels.

The 2023/24 season average farm price remained unchanged at $7.20 per bushel.

Global ending stocks eased from 9.554 billion bushels in January down to 9.532 billion. Analysts were expecting to see a modest increase, offering an average trade guess of 9.570 billion bushels.