South American Numbers Most Interesting Part of February WASDE


The February WASDE Report came out this week and didn’t contain many surprises. Joe Vaclavik, president of Standard Grain, says the final numbers were what most expected to see.

“As expected USDA cut their Argentina crop production estimates for corn and soybeans. They’re still too high, though, so in future reports, it’s very, very likely that they make additional downward revisions. Nothing was surprising there. They did what, generally speaking, the trade thought that they would do. There were some changes to the domestic balance sheet. USDA cut its corn demand for ethanol number. They made a small cut, and that’s it number that could get smaller and smaller if we don’t start grinding more corn for ethanol. We’re not where we need to be. That number is vulnerable. USDA cut the soybean crush number, which is interesting because crush margins in this country are fantastic. I mean, if you’re a bean processor, you get your hands on beans, you’re printing money crushing beans. I suppose maybe the issue is just that there’s not the supply available out there. I mean, we’re talking close the pipeline carry-out levels in soybeans, so it’s awfully tight.”

USDA made a couple of small adjustments for Russia and Ukraine and made no changes to Chinese corn and soybean imports. He says USDA cut the amount of U.S. corn used for ethanol number, which could go even smaller yet this year.

“Corn supplies are tight, and it’s very regional. So, margins in the central and eastern part of the Corn Belt, production margins for ethanol producers, they’re pretty good. But you go out west where you got this strong corn basis, and cash corn prices are drastically more expensive, so the ethanol margins are not that great. USDA projects right now that we’re going to use 5.25 billion bushels of corn for ethanol this year, and that’s the new number, which was cut by 25 million. That’s like 38 percent of all demand for U.S. corn. Based on the pace of ethanol production that we’ve seen from EIA and also from USDA’s grain crush reports, a lot of people think that you could maybe trim 100 million, 200 million bushels off of that number by the end of the marketing year if we don’t see a big improvement. It’s vulnerable.”

He says the most interesting part of the report had to do with the CONAB (KOH-nab) numbers from Brazil.

“CONAB’s like Brazil’s USDA, and they lowered their production estimates for the Brazilian corn crop, and they cited wet weather and late planting. That second corn crop in Brazil, it’s 77 percent of production or that’s supposed to be. They’re having trouble getting it in the ground. And they’re kind of thinking that a percentage of it, at least, is going to be planted beyond what would be the ideal date. So, that was the most interesting thing that came out in total.”