March Ag Supply and Demand Report Recap

USDA released it’s March World Agricultural Supply and Demand Estimates (WASDE) report this morning.  At this time in the marketing year few wholesale changes are typically seen in the report for U.S. summer crop production and use.  This came to fruition as the only noticeable changes were related to soybean use with seed usage increasing three million bushels while residual soybean use was decreased by the same amount.  As a result, production and use (and thus ending stocks) for corn, cotton and soybeans were all unchanged from the February report.The report sent grain markets tumbling in early trading.  Corn markets were unable to recover.  The reason was less related to the WASDE report and mainly stemmed from a bearish export report which kept prices under pressure and ended the day down anywhere from 18 to 23 cents per bushel.  Front month cotton contracts took a hit due mostly to a stronger U.S. dollar while deferred months were higher reflecting the tight supply.  Soybeans were down in early trading -piggybacking on the down corn market and since nothing in the report gave it reason to move higher.  Beans closed the day slightly higher after shaking the corn market and sinking it’s teeth into a decent export report.  Wheat futures were lower as USDA lowered it’s export projections which led to an increase in wheat ending stocks.

Speaking of ending stocks, these remain tight for all summer crops with stocks-to-use ratios at 5%, 10%, and 4% for corn, cotton and soybeans, respectively.  The tight supply situation is the leading factor in the high prices over the past months.  Anytime food and fiber commodities become scarce, a bidding war of sorts springs up and prices rise.  One less desirable outcome of tight supplies and high prices is the increased volatility that accompanies this situation.  Therefore, it is important to remain cautious as you navigate the markets for these crops.