Insights and Updates from Chicago Board of Trade Market

Insights and Updates from Chicago Board of Trade Market

Mintec Global
Spread the news!

Chicago Board of Trade Market News

On April 12, 2024, the USDA unveiled its latest WASDE report, delivering a mixed bag of updates for the corn market. Here’s a breakdown:

Unicaps Sunflower seeds

Usage Increase:There was a slight uptick in U.S. corn usage, particularly for feed and ethanol production. This led to a 50-million-bushel adjustment in total usage, reaching 14.605 billion bushels.

Stocks Reduction: Despite the increase in usage, ending stocks saw a reduction of 50 million bushels, totaling 2.122 billion bushels.

Price Adjustment: Interestingly, despite the decrease in ending stocks, the season-average price experienced a dip of 5 cents per bushel, settling at $4.70.

Market Expectations: U.S. corn ending stocks slightly surpassed the average of pre-report trade expectations, though they remained within the anticipated range.

This update provides a nuanced view of the current dynamics within the corn market, influencing traders’ decisions and market sentiment.

South American corn production was reduced slightly by USDA, dropping 1 MMT in Argentina, but holding Brazil steady with the production estimate in March. The drop in Argentinian corn production matched pre-report trade expectations, but USDA’s Brazilian corn production number was 2.25 MMT higher than the trade pre-report estimate and at the top of the range. The higher Brazilian corn production number by USDA also led to world ending stocks for corn than the trade expected.

Regarding soybeans, the USDA maintained its production estimates for Argentina and Brazil at the same levels reported in March. However, market expectations differed:

  • Argentina Expectation: The market anticipated an increase in soybean production for Argentina.
  • Brazil Expectation: Expectations ranged from a 3 to 7 million metric ton (MMT) decrease in soybean production for Brazil.

Contrary to expectations, the USDA’s estimate of 155 MMT for Brazilian soybean production was at the upper end of pre-report expectations. Additionally, world soybean ending stocks surpassed trade expectations.

In an unrelated development to the day’s WASDE report but relevant to market expectations, the Brazilian crop agency, CONAB, reduced their estimates for Brazilian corn and soybean production. They projected 110.9 MMT of corn and 146.5 MMT of soybeans. This marked an 8.5 MMT gap between CONAB’s and USDA’s estimates for the Brazilian crop, the largest disparity ever recorded between the estimates of the two agencies.

These updates provide valuable insights into the soybean market, highlighting discrepancies between expectations and actual projections, which can impact trading strategies and market dynamics.

Ethanol average daily production for the week ending April 5 averaged 1.056 million barrels. This is a new high daily production for this week of the year. The previous high was 1.034 million barrels per day in 2018. This was down 1.6% from last week and up 10.1% from last year. The amount of corn used for the week is estimated at 104.82 million bushels. Cumulative corn use for the crop year has reached 3.209 billion bushels. Corn use needs to average 103.65 million bushels per week to meet the USDA’s marketing year forecast of 5.400 billion bushels.

The dollar index on Wednesday rallied by +1.04% and posted a 4-3/4 month high. The dollar raced higher Wednesday after the U.S. March CPI report came in stronger than expected, boosting T-note yields and dampening the outlook for Fed rate cuts. Wednesday’s slump in stocks also boosted some liquidity demand for the dollar. Fed swap markets have now priced 50 bp of rate cuts for 2024, less than the 75 bp of rate cuts that were priced last week. The minutes of the March 19-20 FOMC meeting said that almost all officials supported cutting interest rates “at some point this year,” although the committee discussed “the possibility of maintaining the current restrictive policy stance for longer should the disinflation process slow.”

Market Analysis:

Market analysts estimate fund positions across various commodities:

  • Short positions of 90,000 Chicago wheat contracts, 256,000 corn contracts, 138,000 soybean contracts, and 35,000 soybean meal contracts.
  • Long positions of 4,000 soybean oil contracts.