NAPERVILLE, Illinois, May 9 (Reuters) - The U.S. Department of Agriculture on Friday will publish its first official outlooks for the upcoming 2024-25 marketing year, and both the lower price environment and recent weather events could cause a shift in dynamics among major exporters in the coming months.
Global corn supplies in 2024-25 are predicted to hit six-year highs and soybeans all-time highs, though wheat stocks are pegged well below recent averages and up just marginally on the year. U.S. supplies, especially those for soybeans, risk losing additional market share to rival exporters.
BRAZIL BOMBSHELL?
Traders might want to brace for a massive Brazilian 2024-25 soy crop outlook following feedback from USDA officials last month. A year ago, USDA started the 2023-24 soy harvest at a record 163 million tons, though the agency would have gone even higher in hindsight.
USDA’s Brasilia attache in early April forecast Brazil’s 2024-25 soy crop at 157.5 million tons, with a 1% yearly increase in plantings. USDA’s official 2023-24 area sits 1.5% above the attache’s, so USDA is not afraid to go bigger as its official forecasts do not have to match attache ones.
In recent years, USDA’s initial May outlook for Brazil’s soy crop has come in as much as 10 million tons above the preceding attache forecast, and a big Brazil harvest could displace U.S. soy exports, particularly if Chinese demand is disappointing.
Analysts on Friday may finally get the cut to Brazil’s 2023-24 soy crop they have been wanting with the recent deadly flooding in southern Brazil, potentially docking production by 2 million tons or less.
Trade estimates for Friday put Brazil’s 2023-24 soy crop at 152.6 million tons versus last month’s 155 million, though USDA may be unable or unwilling to pre-estimate losses from an event still in progress.
Conab publishes its next update on Tuesday, so USDA-Conab battle talk can resume next week, if needed. The Brazilian agency has carried significantly lower corn and soy estimates than USDA this season.
MORE ATTACHE INSIGHT
USDA’s foreign attaches have been publishing initial 2024-25 outlooks over the last several weeks and these may offer some intel ahead of Friday’s numbers.
USDA’s Beijing post in late March forecast China’s 2024-25 soybean imports unchanged on the year at 103 million tons as increased soymeal use in feed rations will be offset by weaker demand in the swine sector.
The Beijing attache pegged China’s 2024-25 corn production at another record and placed imports down 13% on the year to 20 million tons. China’s 2024-25 wheat imports were seen unchanged on the year at 10 million tons, and Argentina was registered as a potential wheat supplier to China in early 2024.
Argentine farmers are seen shying away from planting corn in 2024-25 and favoring soybeans following the leafhopper situation, and USDA’s attache projects harvested corn area at a seven-year low. In mid-April, the attache cut 2023-24 Argentina corn production to 51 million tons, below USDA’s official 55 million.
Significantly lower corn prices in Brazil could limit next year’s corn plantings, and the attache as of early April estimated 2024-24 Brazilian corn production at 129 million tons, up 6% on the year but 5% below 2022-23’s record.
As of mid-April, the Kyiv attache saw Ukrainian grain production down in 2024-25 since it has not been profitable in a couple of years, swinging planting toward oilseeds. However, USDA a year ago critically underestimated 2023-24 Ukrainian grain output and export potential, so the agency may try to correct for that with less conservative starting targets in 2024-25.
WHEAT CONCERNS
The biggest wheat-producing region of top exporter Russia has had one of its warmest, driest springs on record, and adjacent regions declared a state of emergency on Wednesday over excessively cold, crop-killing weather.
It is unclear whether the cold weather widely impacted winter wheat, though some Russian agencies have trimmed 2024-25 crop estimates over the dryness with output still somewhat close to last year’s levels. May weather is important to Russia’s winter wheat, and this may cause USDA to wait for any larger reductions.
Sometimes-exporter India in 2024-25 may shift to the import ledger for the first time in seven years with wheat stocks at 16-year lows, and this will increase pressure on surrounding exporters. USDA’s Canberra attache thinks 2024-25 wheat production in Australia, a main supplier of Asian markets, will stay well off record levels.
Analysts peg 2024-25 U.S. winter wheat production at 1.888 billion bushels compared with 1.9 billion projected by USDA in February and 1.812 billion in 2023-24. However, there are some significant differences in market expectations by wheat class, which could come into play on Friday. Karen Braun is a market analyst for Reuters. Views expressed above are her own. (Writing by Karen Braun Editing by Matthew Lewis)
