The most noticeable revision in March’s World Agricultural Supply and Demand Estimates (WASDE) report released yesterday was to the outlook for soy. Not surprisingly, output was revised down significantly on the implications of the dry weather in Brazil.
Soybean prices fell following the release, which may indicate that the market has been overly worried about the ramifications of the drought.
The expected surplus in the corn market was revised up on higher projected corn output.
March’s WASDE report from the US Department of Agriculture were released on Monday. The biggest revisions to the projections for the 2013-14 marketing year were unsurprisingly to the soybean market balance. The projected total supply of soybean was revised down by more than 3m metric tonnes. Lower expected output from Brazil and Paraguay are the main factors behind the revision.
Brazilian farmers have struggled to cope with exceptionally dry weather in the early months of 2014, which has affected the country’s coffee, soybean and sugar crops (see Commodities Update: Extreme drought threatens Brazilian crops, 25 February). Although the outlook for the soybean market was revised in a more bullish direction, prices have lost around 2% since the release of the report yesterday. This may indicate that the market has overreacted to the ramifications of the Brazil drought to some extent.
Other mentionable revisions are an upwards revision to the projected corn supplies mainly on the back of higher expected corn output. Corn prices lost around 1% on the bearish revision. Both projected wheat supply and demand were revised up, which leaves the projected market balance more or less unchanged. Initially, wheat prices lost more than 1% but have recovered most of the loss this morning.
Overall, the grains market made a rocky start to 2014. Extreme weather in the US and Brazil has spurred supply worries, so has the geopolitical conflict between Ukraine and Russia (see Research Commodities: Global food prices surge, 11 March). Although we expect global grain output to reach record levels this year, the recent jitters have served as a fair warning not to get to comfortable with the benign outlook for supplies.
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