Gap remains in Brazil production estimates

CHARLOTTE, Mich. — U.S. soybean ending stocks and if there will be a convergence of conflicting Brazilian soybean production estimates were among the questions ahead of the agricultural supply and demand estimates report.

There were some answers, yet questions remained after the U.S. Department of Agriculture released the report April 11.

Angie Setzer and Karl Setzer, copartners at Consus Ag Consulting, hosted a live podcast on X, formerly Twitter, as the USDA balance sheet estimates was released.

What were the expectations on the soybean side entering report day and what happened?

Karl: The soybean carryout of 340 million bushels is what I was a little bit afraid of. We spiked that up from 315 million bushels. The trade was expecting 319 million bushels carryout.

Angie: We saw a reduction in soybean imports, but we also saw a 20 million bushel reduction exports, a slight reduction in seed demand and a little bit lower residual usage number. Residual went down from 22 million to 13 million, seed down a couple million.

Karl: I think the one thing we have to look at moving forward, there was talk of USDA taking soybean carryout up to 350 million bushels, although we didn’t think that would come until a little bit later. I was expecting the end of summer. That spike today may ease up the chances of a bigger number later or it could amplify it a little bit.

Conab, Brazil’s version of USDA, estimates that country’s soybean production at 146.522 million metric tons, while USDA’s estimate remained at 155 million. Analysts expected the crop at 151.68 million metric tons. The same for corn, where USDA has Brazilian corn production at 124 million tons and Conab was 110.96 million. What’s going on there?

Angie: Someone asked me earlier today my thoughts on the spread between Conab and the USDA and, honestly, USDA is probably accurate on last year’s crop.

So, it’s maybe much larger than what Conab has put out, but I feel like this year the cash market in soybeans says the crop is a bit tighter, especially than what it was a year ago. But at the same time, I’m kind of leaning maybe the USDA’s overstated there.

For corn, I don’t know. Ask me in late June because I’m going to need to see how the cash market reacts to harvest more than anything.

What did USDA do with the domestic corn balance sheet?

Angie: Corn ending stocks came in slightly higher than the average trade estimate, but solidly in line with the range of estimates. Corn carryout came in at 2.122 billion bushels. So, we did see corn carryout get adjusted, down about 50 million bushels from last month.

There was a 25 million bushel increase for corn used for ethanol, feed and residual was increased 25 million to get our 50 million bushel reduction in ending stocks.

What is your final take on the latest crop balance sheets and what do we watch for moving forward until next month’s report that will include a first look at new crop year numbers?

Angie: To summarize on the grain side, I’d call it a nonevent for the most part. You could call the soybean number bearish at first glance. The corn number somewhat neutral. The wheat is all about new crop production as we work our way into May and what we see from a demand standpoint.

The report is out of the way. Now it’s weather and what the cash market’s doing and whether or not we see a return of decent Chinese demand or at least some signs where folks feel better about what’s going on when it comes to Chinese demand.

Also, we’re going to be watching Ukraine and Russia and what’s going on there. I don’t know if we can emphasize enough what we could see from a transition in that situation.

I’m not going to pretend I’m a geopolitical expert by any means, but there are a lot of people who are that continue to point out that as the funding or the ability to access funding kind of depletes itself in Ukraine, you’re going to see more struggles with their air defense capabilities.

I would argue one of the things that kind of kept the war contained or at the very least kept it from really influencing market direction here for a while was the air defense system that Ukraine was able to get up to where they were able to shoot down 80%, 90% of what Russia was lobbing at them.

That’s huge when it comes to protecting an export corridor, when it comes to protecting important infrastructure, when it comes to letting your citizens live a normal life. That’s something to be watching.