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USDA Surprises with Ending Stock Numbers

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Good Morning! From Allendale, Inc. with the early morning commentary for February 9, 2018.

Grain markets are lower after yesterday's considerable release of fundamental data. Outside markets look to see if volatility in the stock market will continue today as the US government passes another spending bill.

USDA lowered its ending stock forecast for corn from 2.477 billion bushels to now 2.352 on a rise of 125 million bushels in anticipated exports. World stocks were lowered from last months 206.6 million tonnes to now 203.1. USDA lowered Argentine production by 3 million tonnes and their exports by 1.5. Brazils crop was left unchanged at 95.0.

Soybeans ending stocks were raised from last months 470 million bushels to 530. This 60 million bushel adjustment came from a drop in exports. At our current export pace, we would expect the drop to continue. New crop world stocks were lowered from 98.6 to 98.1 million tonnes. USDA lowered Argentinas crop by 2 million tonnes which was offset by a 2 million tonnes increase to Brazils crop.

Wheat Ending stocks were raised today from 989 million to 1.009 billion bushels. The increase came mostly from a 25 million drop to exports. World stocks were lowered from 268.0 to 266.1 million tonnes.

Chinese corn buyers have canceled as many as four US cargoes of corn, and are switching to Ukraine corn instead as they search for non-GMO varieties. This comes as some Chinese millers are finding it difficult to get permits to process GMO corn.

Weekly export sales for the week of January 26 Thursday February 1 had corn sales during this time totaled 1,769,595 metric tonnes (all 2017/18). This was within the 1.3 1.9 million tonne trade estimate. Soybean export sales totaled 751,614 metric tonnes (743,223 2017/18), also within the 400,000 800,000 trade expectation. Wheat sales totaled 415,517 metric tonnes (393,437 2017/18 + 22,080 for 2018/19). Again, this was within the 200,00 500,000 trade expectation.

Conab lowered their corn production estimate from 92.34 million tonnes to 88 overnight. They suggested lower plantings of second crop corn could be seen from a slow soybean harvest. They raised their soybean production forecast up from 110.4 million tonnes to 111.55.

The weekly Drought Monitor expanded the area in Level 4 of USDA's dryness classification in the Texas Panhandle, Extreme Drought. Wheat traders continue to monitor the drought situation closely.

Argentine farmers are expected to harvest 50 million tonnes of soy in the 2017-18 season, the Buenos Aires Grains Exchange said on Thursday, citing drought as the reason for cutting its previous 51 million tonne forecast. In its weekly report, the exchange also said it expected 39 million tonnes of corn to be harvested this season, down from its preliminary estimate of 41 million tonnes. (Reuters)

Funds were estimated buyers of 6,000 corn contracts, and 9,000 soybeans in yesterday's trade. They were estimated sellers of 6,000 wheat.

U.S. government shutdown happened again, briefly, overnight last night after Congress failed to pass a budget by midnight. A vote a budget deal reached earlier, however, was passed earlier this morning and quickly signed by President Trump. Part of the proposed deal included a one-year reinstatement of a biodiesel rebate. We assume it was included in the final passage.

USDA slightly tightened up its 2018 beef production estimate by 35 million lbs. to a total of 27.725. This would be a 5.9% year over year increase. By quarter, they see production +4.3% for Q1, +12.0% for Q2, +2.3% for Q3 and +5.3% for Q4.

Pork production is estimated to be lowered by 75 million lbs. to a total of 26.885 billion, or 5.1% over last year. By quarter they have production +2.9% for Q1, +4.9% for Q2, +5.5% for Q3, and +7.0% for Q4.

The total supply of meat from the top four proteins (beef, pork, chicken, turkey) will total 220.0 lbs per capita. That is 2.6% over last year and the largest amount ever. The previous record was 219.0 in 2004.

Dressed beef values were mixed with choice down .84 and select up .65. The CME Feeder Index is 148.02. Pork cutout value is down .42.

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About the author

Paul Georgy serves as president/CEO of Allendale, Inc., a worldwide agricultural advisory and research firm that provides agricultural commodity price research and risk management alternatives for producers, major food companies, international corporations, foreign governments, and major news vendors.

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