WASDE: Soy market kept in limbo between US and global view

The WASDE monthly report showed mixed signals Thursday, as global production and ending stocks were cut while US ending stocks were raised, keeping both global bulls and local bears busy during afternoon trading on the CBOT.

Bears took the upperhand at first, with futures trading down minutes after the release, after which bulls took over, but the tussle that followed left the front month contract unchanged as of 1830 London time.

Global Bulls

Global stocks were trimmed to 94.40 million mt, down 3.8% from last month’s update and below the trade's expectations, as the USDA reflected the extent of damage to the Argentinian crop.

A one million mt increase to Brazil's crop, taking it to 113 million mt was expected by the market, but the rise was not enough to offset Argentina's harvest which was slashed 7 million mt to 47 million mt, coming in below the average expectation of 48 million mt.

The USDA left Argentina’s opening stocks unchanged but the cut to production translated into a 1.7 million mt fall in exports to 6.80 million mt, with Argentina expected to import more beans and reduce its domestic crush.

The combined decrease in the production of both Latin American countries was 6 million mt

Local Bears

The USDA showed a more bearish picture for its domestic market, boosting the US ending stocks by 25 million bushels to 555 million bushels (15.10 million mt).

It arrived at this number by lowering its exports by 35 million bushels to 2,065 million bushels, while feeding 10 million extra bushels into their crushers, which are expected to consume some 1.96 billion bushels this season.

This, in turn, lifted the soymeal and soyoil availability for the 2017/18 season. 

The increased crush added 200,000 short tonnes, or 181,000 mt to the domestic S&D, all destined for the US export market, with all other numbers unchanged.

US soybean oil production was moved up to 22.64 billion pounds, or 10.27 million mt, up by 0.12 billion pound, while the USDA lowered its domestic demand, leaving end stocks up.

The USDA estimated a reduction of 300 million pounds of oil for the biodiesel industry, while it expects the food industry to pick up an extra 200 million pounds compared to its last monthly update.

“Lower biodiesel use reflects lower-than-expected soyoil-based biodiesel production through the first quarter of the marketing year,” the report added.