USDA Supply and Demand Report Comments - Grain Market Comments
To start with today was a USDA report day and here is a
recap of the report versus last month and versus trade estimates. You can see that we got neutral to bearish
report for corn, neutral to wheat, and neutral to friendly beans. Price action indicated we had a bearish
report for wheat; but the numbers really didn’t indicate that. But wheat really has been a follower for some
time as corn seems to remain king; especially on crop report days.
|
2011/12 Ending Stocks Estimate
(billions of bushels)
|
||||
|
|
USDA
June |
Avg. Trade
Guess |
Avg. Trade
Range |
USDA
May |
|
Corn
|
0.851
|
0.821
|
0.688 - 0.901
|
0.851
|
|
Soybeans
|
0.175
|
0.189
|
0.130 - 0.218
|
0.210
|
|
Wheat
|
0.728
|
0.753
|
0.727 - 0.775
|
0.768
|
|
2012/13 Ending Stocks Estimate
(billions of bushels)
|
||||
|
|
USDA
June |
Avg. Trade
Guess |
Avg. Trade
Range |
USDA
May |
|
Corn
|
1.881
|
1.750
|
1.223 - 1.950
|
1.881
|
|
Soybeans
|
0.140
|
0.143
|
0.052 - 0.220
|
0.145
|
|
Wheat
|
0.694
|
0.714
|
0.647 - 0.772
|
0.735
|
|
2011/2012 Global Ending Stock
Numbers
|
||||
|
|
USDA
June |
Avg. Trade
Guess |
Avg. Trade
Range |
USDA
May |
|
Corn
|
129.19
|
127.630
|
126.000 - 128.800
|
127.560
|
|
Soybeans
|
53.36
|
52.090
|
51.000 - 53.000
|
53.240
|
|
Wheat
|
195.56
|
197.124
|
196.000 - 198.835
|
197.030
|
|
2012-2013 Global Ending Stock
Numbers
|
||||
|
|
USDA
June |
Avg. Trade
Guess |
Avg. Trade
Range |
USDA
May |
|
Corn
|
155.74
|
149.745
|
145.000 - 154.000
|
152.340
|
|
Soybeans
|
58.54
|
58.140
|
55.700 - 62.000
|
58.070
|
|
Wheat
|
185.76
|
184.791
|
180.800 - 190.674
|
188.830
|
As you can see we continued the trend of disappointment for
the corn bulls with this latest USDA report as we once again left the numbers
unchanged from last month. The only
change was a decrease in exports that was offset by an increase in ethanol
usage. No changes where done for new crop
corn balance sheet at all. It feels like
the trade doesn’t believe the 166 bushel yield for new crop corn that was left
unchanged; but eventually the trade will have to start believing or the number
will have to come down. I would say that
we are very high priced if next January’s report shows the type of yield that
is presently being used; so keep that into consideration as we move
forward. From what I hear most in the
industry are using a corn yield someplace between 155-163. Bottom line if we end up close to the 1.8 billion
bushel carryout that is presently projected look for prices to drift lower.
World corn stocks actually rose from last month for both the
current marketing year and next year’s projection. Another bearish headline that is being
partially offset by the ideas that yields and crop production potential isn’t
near where the USDA pegged it at. But
bottom line is the same here plenty of risk if the USDA doesn’t change and
ideas have always been that big crops get bigger……..hasn’t it?
Bean numbers where good with the decrease in ending stocks
for the US both this year and next; but the world numbers where increased.
Wheat numbers still say that there is plenty of wheat in the
US and in the world; but the trend is going the correct direction. Less then last month in both the US and in
the World for both last crop year and the present crop year which started June
1st.
Below is a little history of the crop supply and demand
numbers; it comes from Mike Sperry……..the big think on it is looking year over
year and month over month. You will see
that we now have a US and World wheat carryout numbers as low as they have been
since 2008. While we have corn numbers
potentially as high as they have been since 2000 in the world with the US
numbers pegged at their highest spot since 2005. Bottom line is if those number or these trends
don’t change things for corn price outlook are not very good. I am in the camp that doesn’t believe the
carryout or yield that the USDA posted today; but the below trend really shows
one that there is plenty of risk so I am also in the camp of practicing good
risk management. Making some sales on
the bounces and maybe buying some puts for protection or selling some covered
calls.
|
World
|
/
|
US
|
Ending
|
Stocks
|
6/12/2012
|
||||
|
Data
|
Provided
|
by
|
Central
|
Plains
|
Services,
|
L.L.C.
|
|||
|
1
|
Metric Ton of corn = 39.36825 bu
|
Metric Ton of Wheat/Soybean = 36.7437 Bu
|
|||||||
|
All
|
Ending
|
Stocks
|
expressed
|
in
|
Billions
|
of
|
Bushels
|
||
|
Year
|
Corn
|
Soybeans
|
Wheat
|
||||||
|
World
|
US
|
Yld.
|
World
|
US
|
Yld.
|
World
|
US
|
Yld.
|
|
|
’00
|
6
|
1.899
|
1
|
|
|
-
|
7.5
|
0.876
|
|
|
’01
|
5.8
|
1.574
|
1.2
|
|
|
-
|
7.4
|
0.687
|
|
|
’02
|
4.8
|
1.087
|
1.5
|
0.178
|
|
|
6.1
|
0.491
|
|
|
’03
|
3.6
|
0.958
|
142.2
|
1.2
|
0.112
|
33.9
|
4.8
|
0.547
|
44.2
|
|
’04
|
5.1
|
2.113
|
160.4
|
1.8
|
0.256
|
42.2
|
5.6
|
0.54
|
43.2
|
|
’05
|
4.9
|
1.967
|
148
|
1.9
|
0.449
|
43
|
5.4
|
0.571
|
42
|
|
’06
|
4.3
|
1.304
|
149.1
|
2.3
|
0.574
|
42.9
|
4.7
|
0.456
|
38.6
|
|
’07
|
5.1
|
1.624
|
150.7
|
1.9
|
0.205
|
41.7
|
4.4
|
0.306
|
40.2
|
|
’08
|
5.7
|
1.673
|
153.9
|
1.5
|
0.138
|
39.7
|
6.1
|
0.657
|
44.9
|
|
’09
|
5.7
|
1.708
|
164.7
|
2.2
|
0.151
|
44
|
7.4
|
0.976
|
44.5
|
|
’10
|
4.9
|
1.128
|
152.8
|
2.6
|
0.215
|
43.5
|
7.3
|
0.862
|
46.3
|
|
’11
|
5.1
|
0.851
|
147.2
|
2
|
0.175
|
41.5
|
7.2
|
0.728
|
43.7
|
|
|
|
|
|
|
|
|
|
|
|
|
’12-’13 May Est
|
5.997
|
1.881
|
166
|
2.134
|
0.145
|
43.9
|
6.913
|
0.735
|
45.7
|
|
’12-’13 June Est
|
6.131
|
1.881
|
166
|
2.151
|
0.14
|
43.9
|
6.826
|
0.694
|
45.4
|
Question; anyone know what our low price has been since 2000
for corn? Under 2.00 on the board; even
in 2005 we where under 2.00 at one point in Dec of 2005. Is our present pegged world corn estimate
higher today then it ended up being when we where under 2.00 a bushel on the
board for corn futures? Yes it is. Therein lies our risk
I don’t want to come off trying to tell one to panic sell as
I have mentioned numerous times I am not that bearish; but I do want to come
off as telling producers that we have perhaps more price risk then one might
realize. So if you need help marketing
or want to look at some protection strategies please give us a call.
At 1:20 we have our markets show old crop corn down 9 cents,
new crop corn is off by 13 cents, old crop beans are up 11, new crop beans are
up about 6 cents, KC wheat is off a dime, MPLS wheat is off 12-15 cents, and
CBOT wheat off 12 cents. This are not
the closes and the grain futures will be trading for about 30 minutes or so;
but the above should be close to the settlements.
Outside markets are also still open but as of 1:30 equities
are firmer with the DOW up about 100 points,
crude up about 70 cents a barrel, the US dollar near unchanged, and gold
up 9.00 an ounce.
A little disappointing for the grains is the fact that we
couldn’t brush off the bearish USDA numbers and trade positive for corn. Perhaps if we consider the fact that we where
not down the limit given the difference between new crop corn projected
carryout versus the estimate you could consider today a small victory for
bulls; but overall disappointing; nice to see the outside markets stabilize at
least for a day.
As we go forward weather will be extremely important but it
might be on the bulls to prove the USDA wrong, also important will be the
outside markets and the June 29th stocks and acre update.
One thing that some have talked about is that they look for
the USDA to cut yield in July but keep overall production for corn near unchanged
behind ideas that the good spring allowed more corn to get planted. We also have to remember last year’s stocks
number for corn; one that caused July corn to be down over 70 cents a
bushel. Cash markets today and really
all year have felt tighter then they did a year ago; but there will be the risk
that our high prices or strong basis has curved some demand. There might also be some risk out there that
ethanol plants are much more efficient then they used to be; perhaps the 2.7
ethanol to bushel coversion get’s changed sometime? Locally I know we have shipped milo to
ethanol plants that never used it before and that means that they are not using
as much corn.
The big thing that the markets will watch for fundamentally
is if we do cut corn supply how much will we cut corn demand? If you use some of the corn yields that some
in the industry have thrown out there with the present demand forecast it is
easy to get bullish in a hurry. But ECON
101 should remind us that less supply also equals less demand; and that brings
us back to what happened last July high prices curved demand and stocks came in
higher then expected as we went from below 700 million bushel for a projected
carryout to over 1.1 when all said in done on the September stocks report.
Don’t forget that we will have our weekly MWC Grain Marketing
Round Table tomorrow at 3:00 in Onida; as we will discuss today’s report as
well as go over charts and possible strategies to consider when pricing your crops.
Please give us a call if there is anything we can do for
you.