The corn balance sheets that were released this month were less friendly than trade had been expecting. The US corn carryout was trimmed a mere 50 million bu (mbu) to a 1.5 billion bu (bbu) total. Trade was expecting to see ending trimmed by at least 170 mbu. The entire reduction came from elevated exports. The USDA is now predicting an average US cash corn value of $4.30 this year, a 10-cent increase from January. 

Only minimal changes were made to the US soybean balance sheets as well. Ending stocks decreased 20 mbu to reflect the ongoing export demand we are seeing. This will give the United States a pipeline minimal carryout of 120 mbu. While very thin, this total was on the high side of pre-report estimates. The USDA left the average US soybean cash value unchanged at $11.15. 

The USDA left its wheat carryout estimate unchanged at 836 mbu which was in the middle of trade guesses. There are thoughts this number will decrease though given recent weather and the likelihood of winterkill in the Plains. 

Global numbers were also less supportive than expected. The world corn carryout is now projected at 286.5 million metric tons (mmt), nearly 3 mmt more than predicted in January and well above the average trade guess. World soybean stocks are expected to tighten to 83.4 mmt which was just above the average trade prediction. Global wheat stocks dropped from 313.2 mmt in January to 304.2 mmt this month as feed demand is expected to rise considerably. This is led by China where feed demand is expected to be a record 30 mmt this year. 

No changes were made to South American production which added to the negative tone of the report. This kept Brazil’s crops at 133 mmt on soybeans and 109 mmt on corn. Argentine production was held at 48 mmt for soybeans and 47.5 mmt for corn. For the most part trade had been expecting these numbers to decline given drought conditions in both countries. 

Forecasters continue to closely monitor US weather conditions, mainly the drought conditions that are surfacing in several regions of the country. The most watched of these is in the heart of the Corn Belt including much of Iowa and parts of Illinois. Trade is also watching conditions in the Plains and what they may mean for wheat production. These conditions are also being monitored by importers to see if they will be able to secure needs or need to look elsewhere. 

The obvious worry is that drought will again reduce US crop size. While this is possible, it is not necessarily true. In fact dry conditions to start the planting and growing season may be a benefit for production. A dry spring will allow early planting and prevent the loss of acreage that took place last year, especially in a year where every acre is needed.

Drought in that area may also impact livestock production if pasture conditions remain poor and feeders are faced with high-priced grains. Many livestock producers are already faced with high priced feed grain costs and have adjusted their buying habits as a result. While some are opting for cheaper feed grains, others are simply buying immediate needs only. If these conditions continue, we will likely start to see adjustments to the number of cattle being fed. 

Analysts are taking current weather conditions and trying to predict what it may mean for this coming production season in the United States. So far, this winter has been warmer and drier than usual in the United States, but comparing to recent winters, this is not that uncommon. In fact several of the most recent winters have been just as mild as the current one. Looking at production the following year there is not a definitive pattern when it comes to yields or crop sizes, as growing season weather is much more of a factor. 

A big story in the market remains the need for rationing of soybeans. While we have seen futures rally to attempt this, it has done little to deter demand. The main reason is that while soybeans have rallied, so have all products that could be used as substitutes, including palm oil and distiller grains. The decline we have seen in the value of the US dollar has also made it hard to ration soybeans as this negates much of the rise in futures for a buyer. Some buyers simply have no other choice for oilseed needs and are buying soybeans at any value. 

Demand for US wheat is becoming more of a market factor. As more countries start to ration their inventories of grain, we are seeing more buyers line up for US offers. News that Argentina has suspended corn sales for the next sixty days is also supporting the use of wheat for feed. This demand has driven wheat to highs not seen since 2014. The question is how long this demand will last as global production is expected to increase this coming year. 

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