left the U.S. ending stocks number for soybeans unchanged in its monthly World Agricultural Supply and Demand Estimates (WASDE) report, deflating hopes of what some market-watchers said could be a bullish jolt for that pit. At the same time, though, corn futures did get that same jolt with a fresh estimate of a 1.48-billion-bushel U.S. stocks number based on exports moving from 1.45 billion to 1.60 billion bushels since the January data.
"U.S. feed grain ending stocks for 2013/14 are expected lower with a 150-million-bushel increase projected for corn exports. Global trade data and strong export sales support this month’s outlook for increased world corn imports. Reduced foreign export prospects also lower competition for U.S. corn in the world market," according to Monday's WASDE report. "U.S. corn ending stocks are projected 150 million bushels lower with the export increase. The season-average farm price for corn is raised 10 cents on both ends of the projected range to $4.20 to $4.80 per bushel. Season-average farm prices for the other feed grains are also projected slightly higher."
"Today’s WASDE report surprised some market players with the reduction of United States ending corn inventories by 150 million bushels due solely to increased expectation of corn exports from the U.S.," says Sal Gilbertie, Teucrium Trading LLC senior grain analyst.
But not all the numbers were unexpected, says U.S. Commodities grain analyst and broker Don Roose. With lower prices in the last couple of months, U.S. corn has been a better deal than it has been for years on the export market, giving overseas buyers incentive to shift some business back to the U.S.
"The chart patterns have been positive for corn. We thought ending stocks would be closer to 2 billion and now we're under 1.5 billion. As ending stocks shrink, markets move higher," Roose says. "Exports have been pretty big, with us competing with competition out of Ukraine and South America, but we still have to achieve those numbers.
"It's all about the demand side on corn. On the demand side with soybeans, we've kind of reached some maturity there," Roose adds pointing to the Fed's lack of movement on the soybean ending stocks number that reflects slight growth in both exports and imports.
With Monday's numbers showing a relatively light inventory of both corn and soybeans on hand, it underscores the need to produce big crops of both this year in the U.S. and abroad.
Adds Gilbertie: "The increase in year on year usage estimates for both course grain and oilseeds continues to reflect both good oilseed import demand from China as well as steady and even increasing grain demand from the rest of the world. Demand expectations for U.S. wheat are also raised as foreign sources of wheat become less competitive. Overall the report sets a starting baseline for corn supplies in the 2014-15 growing season slightly below what the trade had anticipated while confirming quite healthy global demand for all grains and oilseeds."
That's expected at home, Roose says, with the likelihood of a lot of acres re-entering production that weather prevented from seeing the
planter last year. And, in South America, USDA's data reflect unchanged production potential for soybeans, though local sources say different. If that's true, the production totals for Brazil could be trimmed, adding to the tightening balance sheet for beans.
"The higher-than-average temperatures registered in Londrina, northwest of the state of Paraná in Brazil, have generated losses of over 45% of the soybean harvest in the region, according to a report from the Agronomic Institute of Paraná. The harvest was anticipated in order to avoid more losses," says Luis Vieira. "The last rain in Lodrina occurred last January 25th. In January, the average precipitation for the region is 8 inches, but it just rained 5.5 inches in the month. On the other hand, corn producers were not affected by the drought because they have harvested before."
But, just with other factors, how the market moves in relation to such a set of circumstances has just as much to do with perception as it does reality, and with USDA's data failing to reflect observations like Vieira's, it may not mean a lot to prices too soon.
"The government took production up a million metric tons in Brazil. I guess if I had to sum it up, I would say the soybean crop in South America is probably bigger than the trade thought," Roose adds.
And, there's not a lot of agreement around the country when it comes to USDA's soybean numbers and the prices they're yielding moving ahead from Monday's reports, especially when it comes to supplies.
"The bean number is laughable. Looks like the basis will be doing the work, and we will have another basis cliff in soybeans later on," says Agriculture.com Marketing Talk advisor roaringtiger1. "It doesn't matter if the USDA adds, subtracts, multiplies or divides...they keep coming up with the same number."
