December 3rd, 2013
Supply/Demand: As expected, there was no revision made to the November production numbers. That will be seen on the next update set for January 10. For demand there was not a lot of surprise with the 50 million bushel increase in exports. This fits in well with the strong pace of sales made in recent weeks. The real surprise was the 50 million bushel increase in the corn for ethanol category. While the recent ethanol production pace has been very strong, at 9% over last year, most analysts thought the next move would be down. Keep in mind the EPA is in the middle of its 60 day comment period on the proposal to lower the RFS. The grain trade will likely expect USDA to lower this number after the comment period ends. Of minor news a small 5 million bushel increase in imports was added to the mix. Ending stocks, which were 1.887 billion bushels, were lowered to 1.792. It is very likely the trade will not price in a 1.8 billion bushel stock number as there are expectations for a production increase on the January report. Whether 1.8 or even 1.9 keep in mind these numbers are more than double last year’s level.
World Numbers: No changes were made to either Brazil or Argentina production. It was Canada and Ukraine with both saw a 1 million tonne increase over the November number. For another month they left the China crop unchanged at 211 mt. World corn ending stocks were lowered from 164.33 mt to now 162.46.
Price Expectations: If the trade believed corn stocks would actually be 1.8 billion bushels, USDA’s number this morning, then futures are fairly priced at $4.20. We believe they will continue to trade with the assumption of 1.9 billion though which would imply $3.95.
Supply/Demand: Changes made this month were very reasonable. Just like with corn there was no change to production. Based on the very strong export sales pace USDA chose to increase their export estimate by 25 million bushels. That could even increase the next month or two if these recent sales continue into January. Given the strong interest from soybean processors USDA also chose to raise crush by 5 million bushels. The offset here was a 10 million bushel increase for imports. As a whole, the decline in ending stocks from 170 million bushels down to 150 was expected.
World Numbers: Despite recent Brazil estimates calling for production of over 90 million tonnes, USDA kept its number unchanged at 88 mt. Argentina was raised by 1 million tonne. No other changes of significance were seen and world stocks rose from 70.2 to 70.6 mt.
Price Expectations: Today’s numbers can be called neutral for soybeans. Our downside target of $12.50 remains intact. For the short term though, the current trade of $13.00 is reasonable. We would expect lower prices to resume when South American crop development advances.
Supply/Demand: All demand numbers were left unchanged compared with last month. We cannot argue too much with USDA decision not to touch exports. Keep in mind it is only in corn and soybeans that exports were raging. Ending stocks were lowered from 575 million to now 565.
World Numbers: A 1 million tonne increase was made to Australia’s crop and a 4 mt increase for Canada. These decisions follow recently announced production revisions from their respective governments. It was a little surprising to see no change made to Argentina’s 11 mt crop. That clashes with their government’s current 8.5 mt estimate. With the net increase in production, world ending stocks rose from 178.5 to 182.8.
Price Expectations: We will leave our discussion of a $6.50 price level unchanged.