The recent release of the WASDE report has ignited a fierce debate within the industry, with experts scrutinizing the realism of USDA's demand projections and anticipating the possibility of further cuts. Key concerns arise regarding the accuracy and practicality of these forecasts.
Arlan Suderman from StoneX Group expresses skepticism toward USDA's export target, considering it to be overly ambitious and detached from current market dynamics. Suderman also highlights the agency's underestimation of the crush number for soybeans, failing to account for the substantial growth in renewable diesel and sustainable aviation fields, as well as the increasing number of crush facilities.
This strong demand for soybeans might diminish the need for imports from the United States. China has been importing 2 to 3 million metric tons beyond their crush needs monthly since May, and Suderman expects this trend to persist for a few more months, resulting in a significant surplus of 12 million metric tons before U.S. exports commence.
This surplus could provide China with alternative options and bargaining power in terms of pricing and business preferences. While initial reactions characterized the July WASDE report as bearish for grains, Suderman suggests that subsequent analysis revealed a less bearish outlook than initially perceived. Concerning yield projections,
DuWayne Bosse from Bolt Marketing emphasizes the critical role of August rains in determining soybean crop success. Depending on the distribution of rainfall and acreage allocation among different states, soybean yield has the potential to increase or decrease. As for corn, USDA lowered the yield by 4 bushels, but Suderman suggests that the outcome could swing in either direction, with favorable weather conditions potentially compensating for any yield loss.
With USDA estimating corn carryover at 2.262 billion bushels after a minor increase from June, Bosse posits that a yield of around 171 or 169 would be necessary to bring corn stocks below the 2-billion-bushel mark. However, he questions USDA's projection of a 450 million increase in new crop export demand, finding it unlikely to materialize, especially given current market prices. As a result, painting a bullish picture for the corn market becomes increasingly challenging.
Source : wisconsinagconnection