MarketsFarm — While traders and analysts continue to keep an eye on weather conditions, their collective focus will momentarily shift on Friday when the U.S. Department of Agriculture (USDA) releases its monthly world agricultural supply/demand estimates (WASDE).
This month’s report will be highly significant as it will announce the first U.S. crop production estimates for the 2023-24 marketing year. On average, the trade is expecting ending stocks for new crop corn and soybeans to exceed those from 2022-23, while remaining unchanged for wheat.
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However, Terry Reilly of Futures International in Chicago warned that the ranges in trade estimates are extremely wide.
“We haven’t seen wide ranges like these in a while for new crop,” he said. “If (new-crop) ending stock numbers for corn and soybeans are higher than old crop, in both the U.S. and the world, what is that going to do for new-crop prices over the long run?”
Reilly added that the trade will also focus on old-crop corn and soybean production numbers from Argentina, which is being adversely affected by severe drought.
“There is a lot to absorb in this report and it’s a big data dump day,” he said. “It’s going to take the trade a little bit to go through the numbers to figure out price direction going forward.”
Reilly expects prices to grind lower in the short term unless there are new developments in the Black Sea Grain Initiative, which is set to expire next Thursday (May 18).
He also expects the trade to pay close attention to USDA’s winter wheat production estimates. While rains have fallen on growing areas over the past two weeks, there has been little improvement in crop ratings.
“I don’t think we can escape this drought. It’s not only affecting wheat, but some recent corn plantings, as well. Over the short term, we don’t see any major problems. But over the long term, the trade is going to have to keep an eye on the (El Niño) situation and see how things are going to (be affected) weather-wise down the road during the summer growing season,” Reilly explained.
“Spring plantings are going in very quickly and in a timely manner, but there are still some issues with drought in the western Great Plains and even parts of Canada like Alberta. It’s going to be important to keep an eye on sea-surface temperatures.”
The possibility of El Niño can also have adverse effects on growing conditions not only in the U.S., but also in Brazil, India and Australia, according to Reilly.
He also mentioned that palm oil production could be cut in Indonesia and Malaysia due to poor weather conditions.
“After this report, weather will become more important to traders than it currently is.”
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.
