The USDA didn’t provide any notable new fundamental developments for the grain/oilseed markets in today’s WASDE report, with the heaviest focus moving forward being on U.S. weather developments. At this time, weather is viewed with a negative bias as a warmer/drier period across the corn belt will help accelerate planting activity, while a very good rain event on tap for the Southern Plains will help eliminate any immediate dryness concerns if actual rainfall is in line with forecast amounts. A summary of today’s key numbers relative to market expectations is provided in the included PDF file, while tables summarizing the USDA’s specific revisions to the U.S. balance sheets today are provided at the end of this post.

Corn The USDA lowered 2015/16 U.S. corn feed/residual usage by 50 million bushels today to 5.250 billion bushels, which would be down from last year’s 5.324 billion, and resulted from their assessment of the March 31 Grain Stocks report of March 1 corn stocks. Based on their new estimate, following 1st half feed residual usage being down 0.9% from last year, 2nd half (March-August) feed/residual usage would need to be roughly 1.615 billion bushels, down 2.6% from last year’s 1.657 billion in order for annual usage to hit the USDA’s 5.250 billion bushel estimate. In our opinion, that appears to be a bit of aggressive assumption following 1st half data, but with expected additional competition from DDGS and sorghum supplies, given slowing exports, we understand their revision. At this time, we will maintain a slightly better annual feed/residual usage expectation at 5.275 billion bushels, reflecting a 2nd half decline of 1.0% from last year. USDA partially offset the lower feed/residual usage estimate by raising 2015/16 corn for ethanol usage by 25 million bushels to 5.250 billion and would be up less than 1% from last year’s 5.200 billion. After going through and closely examining the differences so far this marketing year in the implied corn usage data based on the EIA’s weekly ethanol production reports and that of the official EIA monthly ethanol production numbers/USDA monthly corn used for ethanol production, we can’t argue with the USDA’s uptick in their annual corn for ethanol usage estimate today. Based on our closer look, we now estimate U.S. weekly ethanol production needs to average roughly 984K bpd through the end of August in order for the USDA’s 5.250 billion bushel corn for ethanol usage estimate to be reached. This would reflect a 2.8% increase in ethanol production relative to last year, and is essentially identical to the 2.9% average increase in production expected so far marketing year to date (Sept-March). Accordingly, we have bumped our corn for ethanol usage estimate up to 5.250 billion bushels, as well. On a side note, USDA did raise sorghum F/S/I usage by 25 million bushels today, citing the strong level of sorghum for ethanol usage of late. This bumps their implied sorghum for ethanol usage estimate to 100 million bushels (USDA does not have a specific ethanol usage category for sorghum in their balance sheet) from 75 million bushels previously. If the recent situation continues, in which 21 million bushels of sorghum was used for ethanol production in February alone, further upward revisions could be seen down the road. USDA did not revise their 1.650 billion bushel U.S. corn export projection today, as we expected, and we can’t argue much with the estimate at this time. We are marginally below USDA at 1.640 billion, but is largely inconsequential. The bottom line saw USDA raise 2015/16 U.S. corn ending stocks by 25 million bushels today to 1.862 billion, which was a slightly larger increase than the market expected based on the average trade estimate of 1.847 billion bushels. We now see 2015/16 corn stocks marginally below USDA at 1.848 billion bushels. Next month, in the May 10 WASDE report, USDA will release their first official estimate of the 2016/17 U.S. balance sheet. As they apply the March 31 Prospective Plantings report acreage estimate of 93.601 million acres vs the 90.0 million assumed at the February Ag Outlook Forum and, most likely, reflect 2016/17 ending stocks a bit higher than they did in February (current old crop stocks at 1.862 billion compare to USDA’s Feb assumption at the time of 1.837 billion), 2016/17 total supplies are likely to see a 550-600 million bushel increase from the Ag Forum’s 15.702 billion bushel assumption. We’re currently at 16.308 billion bushels in 2016/17 total supplies, assuming USDA acreage and trend yields, vs 15.382 billion in 2015/16. We do not anticipate USDA notably pushing up 2016/17 demand ideas, but we do feel there is some room for increases. The bottom line is the USDA’s Feb Ag Outlook forum 2016/17 U.S. corn ending stocks estimate of 1.977 billion bushels could easily jump up to 2.500+ billion bushels on May 10. As seen in the balance sheet and stocks/usage ratio chart below, it is very difficult, if not impossible, to draw a constructive fundamental picture of the corn market moving forward barring a major weather problem. Even if 2016/17 acreage proves 1.0 million acres less than current estimates, new crop ending stocks would still likely prove to be well over 2.0 billion bushels, even with rather optimistic demand expectations. We remain very cautious getting caught up in any periodic upside price reactions that may be seen due to perceived planting delays concerns or South American weather issues at this point. Dryness for the Brazilian winter corn crop does need to be watched moving forward, but is not seen as an immediate constructive element for the market with U.S. planting accelerating in the weeks ahead. USDA raised the Argentine corn crop by 1.0 MMT today to 28.0 MMT and raised their export projection by 2.0 MMT by 19.0 MMT, which would be in line with old crop exports. The Brazilian crop and export estimates were left unchanged. USDA actually lowered Chinese corn ending stocks to 109.5 MMT from 111.5 MMT previously, but at some point, the day of reckoning with their estimate has to come to fruition with widespread, essentially unanimous, ideas within China that stocks are 200+ MMT. Even with the Chinese stocks reduction, USDA raised 2015/16 world corn ending stocks to 208.9 MMT from 207.0 MMT previously and were above average market expectations of 207.8 MMT.

Soybeans USDA’s U.S. soybean balance sheet revisions were limited today. USDA did revise U.S. soybean export higher by 15 million bushels to 1.705 billion bushels, which is understandable given the recent relative strength of old crop sales to last year’s sales at this time of the year. As we wrote about in our pre-report comments, sales of late have, undeniably, been respectable compared to the slowdown in sales in past recent years at this point of the marketing year. However, we still have the significant unknown of what will be seen during June-August when decisions are made by importers, primarily China, on what old crop commitments on the books will be shipped and which will be carried forward to 2016/17. Typically during the final three months of the marketing year, net cancellations in sales are fairly common as old crop sales get rolled forward to new crop. Depending on the shipment pace out of South America over the coming months and the uncertainty of June-August sales/cancellation developments, we feel USDA may have been a bit premature in raising their export estimate at this time. The only other revision in the USDA’s balance sheet was a minor downward tweak in soybeans used for seed following the March 31 Prospective Plantings report showing new crop acreage ideas essentially unchanged from 2015/16. USDA did not lower U.S. soybean crush, as we feel eventually will be the case, today. As we discussed in our pre-report comments, we felt the fact that February crush was larger than expected and down only marginally from last year could provide a reprieve to a crush reduction today and that appears to be the case. However, we still expect 2015/16 crush to prove 15-25 million bushels lower than the USDA’s current 1.870 billion bushel estimate in the end. We’re currently at 1.850 billion. The USDA’s downward revision in 2015/16 U.S. soybean ending stocks to 445 million bushels from 460 million last month reflected a slightly lower stocks number than the average trade estimate reflected at 456 million bushels, but is hardly a game-changer, or even an actual fundamentally-supportive development, for the soybean market in the big picture. Stocks of 445 million bushels are still more than double last year’s 191 million bushels and the highest since 2006/07. Looking ahead to the USDA’s 2016/17 U.S. soybean balance sheet ideas in the May 10 WASDE, there may not be major revisions from their ideas at the Feb Ag Outlook forum. At the time, acreage was estimated at 82.5 million acres, in line with the March 31 report’s estimate of 82.236 million. They had beginning stocks at 450 million bushels at the time vs today’s USDA’s 2015/16 ending stocks estimate of 445 million. Accordingly, any 2016/17 ending stocks revisions from the February ideas of 440 million bushels are likely to be demand-related. On that note, we do feel their new crop export ideas in February were fairly aggressive at 1.825 billion bushels, up 120 million bushels (+3.3 MMT) from current 2015/16 export ideas, while the USDA ag attaché sees China’s 2016/17 total imports at 84.5 MMT vs 83.0 MMT this year and imports from the U.S. in 2016/17 unchanged from this year’s 30.0 MMT. The U.S. has lost soybean export market share to South America in recent years, so a 3.3 MMT increase in U.S. exports next year may be an aggressive assumption in the context of the very large South American crop being harvested. We feel the bias for a revision of the USDA’s 2016/17 U.S. soybean ending stocks estimate of 440 million bushels at the Feb Ag Outlook Forum is to the upside in the May 10 WASDE report. USDA made no revisions, whatsoever, to the U.S. soybean meal and soybean oil balance sheets today. We continue to struggle with the premise of soybeans trading above $9.00 in the context of U.S. soybean ending stocks being more than double any level of stocks seen over the last 10 years and no immediate weather concerns for the U.S. heading into the planting season. While the market has been able to sustain a bit of strength of late, we do not see a fundamental backing for it to continue and strongly anticipate the market moving back lower over time. USDA left the Brazilian soybean crop unchanged this month at 100.0 MMT, but raised their export projection solidly by 1.5 MMT to 59.5 MMT and up would be up nearly 9.0 MMT from last year on an October-September basis. On a local marketing year basis (Feb-Jan), Brazil’s exports are likely to be up 3-4 MMT from last year. USDA raised the Argentine soybean crop to 59.0 MMT from 58.5 MMT previously, but ticked exports lower by 400k tonnes. They would still be up nearly 1.0 MMT from last year, though. USDA raised 2015/16 Chinese soybean imports by 1.0 MMT to 83.0 MMT.

Wheat USDA only made a single, minor revision to the U.S. wheat balance sheet today in lowering 2015/16 U.S. wheat feed/residual usage by 10 million bushels to 140 million and is still slightly above last year’s 120 million. The downward revision was made in reaction to the March 31 Grain Stocks report which reflected slightly lower 1st-3rd quarter feed/residual usage than previously anticipated by USDA. Following the March 31 report, we lowered our annual estimate to 120 million bushels and still anticipate USDA’s estimate moving a bit lower in the end. USDA did not revise their U.S. wheat export estimate of 775 million bushels today, as we thought possible. Similar to corn and soybeans, recent wheat export activity had been respectable enough to allow USDA to leave their estimate unchanged this month, but last week’s net cancellations of old crop sales and the seasonality of very limited additional sales likely being seen, still has us anticipating final exports being a bit below the USDA’s estimate. We’re maintaining our 2015/16 U.S. wheat export estimate at 760 million bushels. Looking at the all wheat balance sheet, the USDA raised 2015/16 U.S. ending stocks by 10 million bushels to 976 million, while the average trade estimate was similar at 979 million. Given our ideas on slightly lower exports and feed/residual usage in the end, we estimate U.S. wheat ending stocks at 1.003 billion bushels. While the USDA’s all wheat balance sheet appeared to be rather mundane, they did make widespread by-class revisions this month, with the bottom line seeing the three major classes of wheat experiencing stocks increases. USDA raised HRW stocks by 8 million bushels to 427 million (294 mil last year) as exports and domestic usage were both lowered. USDA raised SRW by 8 million bushels to 178 million (154 million last year) with exports and domestic usage both being lowered, as well. USDA raised HRS stocks by 8 million bushels, as well, to 296 million (212 million last year) on a combination of larger imports, slightly higher exports and slightly lower domestic usage. On the other hand, USDA lowered white wheat stocks by 8 million bushels to 47 million (67 million last year) and lowered durum stocks by 6 million to 28 million (26 million last year). Looking ahead to the May 10 report, USDA will be issuing their first objective crop estimate at that time of the 2016/17 U.S. winter wheat crop, which will obviously play into their first official new crop balance sheet estimates, as well. The March 31 Prospective Plantings report reflected all wheat acreage 1.4 million acres less than their Feb Ag Outlook Forum assumption, but the increase in 2015/16 ending stocks more than offsets the lower production implications of the lower acreage. On the demand side, with the lower old crop feed/residual usage ideas, their 2016/17 estimate in February of 200 million bushels is appearing optimistic. At this time, we will not argue with their 850 million bushel export projection on a recovery from this year’s multi-decades low exports and would just be back in line with 2014/15 exports of 854 million, but still the 2nd lowest since 2002/03. We are currently estimating 2016/17 U.S. wheat ending stocks at 991 million bushels vs USDA at 989 million bushels at the February Ag Outlook forum, and this year’s estimated 1.003 billion bushels. In the coming weeks, we will begin making our objective winter wheat crop estimates ahead of the May 10 Crop Production report. Those estimates will likely influence our 2016/17 balance sheet ideas heading into the May WASDE report. USDA raised 2015/16 world wheat ending stocks today to 239.3 MMT from 237.6 MMT last month and was a larger-than-expected increase based on the average trade estimate of 237.0 MMT. USDA raised Chinese wheat stocks to 96.3 MMT from 93.8 MMT previously and are up a massive 27% from last year’s 76.1 MMT.