Record Production in South America and Lower Demand Will Keep Soybean Oil and Corn Prices Under Control During 1st half of 2023

The USDA's February 2023 World Agricultural Supply and Demand Estimates report is not expected to be as influential on the market as its January report series.

This is because there won't be any changes made to the supply of corn, soybeans, or wheat produced in the United States, which helps to lessen some of the market volatility that has come to be linked to USDA reports.

The main focus of tomorrow's WASDE report will be the production of corn and soybeans in South America. Although the USDA could increase the size of Brazil's corn crop, traders do not anticipate any revisions to be made tomorrow. The biggest cuts are anticipated to be made to Argentina's corn and soybean crops.

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After three hard years, La Nia is finally starting to show symptoms of giving up, and Argentina's drought is starting to ease. There are still some crop hazards in southern Brazil where the drought is still an issue. But over the following ten days, dry weather is anticipated to replace the recent weeks' significant rainfall in Mato Grosso, which should facilitate soybean harvest and the planting of corn's second crop.

Brazilian corn production estimates for the 2022–2023 marketing year were found to have grown by 0.4% from USDA's current expectations to 4.941 billion bushels, according to USDA attaché reports that were recently published. Since market analysts do not anticipate significant revisions from USDA regarding Brazilian corn and soybean production in tomorrow's data, bearish price action may be necessary if corn figures are revised upward.

The soybean production in Argentina should be reduced even more, according to a different USDA attaché there. According to the attaché, the Argentina soybean harvest would only yield 1.323 billion bushels in 2022–2023, which is an astonishing 349 million bushels less than USDA's current projections, which were already significantly reduced by 147 million bushels in the January 2023 WASDE.

The marketing year 2022/23 Argentine soybean crop has been harmed by dry weather and high temperatures, particularly first crop soybeans within a 125-kilometer radius of Rosario, Santa Fe Province. Second crop soybeans will benefit from the recent rains, but a significant rebound would require better-than-average weather through February.

The market anticipates significant reductions in Argentina corn production for the growing season of 2022–2023. In January 2023, the USDA reduced Argentina's corn harvest by 118 million bushels. The negative revision for Wednesday is estimated by pre-report trade at 138 million bushels.

Other Economic Factors Affecting Brazilian exports.

Other market factors will also have an impact on South American crop production in the coming months. For example, a recent Reuters foreign exchange poll predicts that the real, the country's currency, will continue to decline over the next nine months. Luiz Inacio Lula da Silva, the president of Brazil, has spent much of his time in office raging against the central bank for maintaining unreasonably high interest rates.

Da Silva's programme, which is centred on social issues, is hampered by the high rates. Although the real has increased 1% since January 1, 2023, it is predicted to decline 1.7% over the next 12 months, reaching 5.24 reals to the US dollar. The real was trading at 5.15 to the dollar as of yesterday.

The increased Canadian wheat supply will probably result in increased worldwide wheat supplies and a downward pressure on wheat prices.

That's good news for Canadian cattle farmers, who relied heavily on imports of American feed during the previous winter. However, there is another negative aspect affecting the corn and wheat export markets in the United States.

The third year in a row that Australia's wheat crops have broken records, the USDA attaché in Canberra, Australia is urging USDA to increase the Australians' 2022–23 wheat harvest by 1% to 1.359 billion bushels. This is due to the ongoing unrest in the Black Sea, which is expected to have a positive impact on exports.

Given that markets already anticipate a little increase in ending wheat stockpiles worldwide in tomorrow's report, this supply increase will likely have a negative impact on wheat prices globally.

In order to encourage China to continue purchasing more Brazilian corn in the upcoming months, the USDA attaché in Beijing underlined Brazilian corn's cheap costs.

As the demand for maize substitutes declines due to rising pricing for wheat and sorghum, feed mills [in China] have started mixing more corn back into feed regimens. Brazilian corn is currently available and priced similarly to domestic corn. China will probably turn to Brazil for a sizeable portion of its corn imports after the first cargo of Brazilian grain arrives there in early January 2023.

After amended planting data led to a lower production value, the USDA attaché in Mexico City anticipates that Mexico will need to raise its current corn imports during the 2022–2023 marketing year. The article now requests that USDA increase Mexico's maize imports in 2022–2023 to 681 million bushels, up 4 million bushels from current projections but still less than the 692 million bushels in shipments received last year.

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Although it is not a large rise, it represents the only instance of a bullish pricing opportunity for American corn exports.

As per Procurement Resource, it is anticipated that the USDA's February 2023 World Agricultural Supply and Demand Estimates report won't have the same market impact as its January report series. This is due to the fact that the supply of corn, soybeans, and wheat grown in the US will not vary, thereby reducing some of the market volatility that has been associated with USDA data.

The production of corn and soybeans in South America will be the main topic of tomorrow's WASDE report. The USDA may boost the estimated size of Brazil's corn crop, but traders do not expect any changes to be announced tomorrow. The corn and soybean crops in Argentina are predicted to suffer the greatest reductions.