April 19, 2014

April 2014 USDA Report

April 4th, 2014

Scroll Down for Rich Nelson’s Full Recap

US Ending Stocks

in million bushels

USDA

12/13

USDA

13/14

ALDL

13/14

Trade

Range

Trade

Average

USDA

Actual

Corn 821 1456 1406 1306-1478  1403  1331
Soybeans 141 145 135  125-147 139  135
Wheat 718 558 579 553-625 583  583

 

World Ending Stocks

in million metric tonnes

USDA

12/13

USDA

13/14

ALDL

13/14

Trade

Range

Trade

Average

USDA

Actual

Corn 134.67 158.47 157.11 156.5-159.16 157.72  158.00
Soybeans 57.79 70.64 69.80 68.50-71.90 70.14  69.4
Wheat 175.92 183.81 183.55  182.5-185.3 183.65  186.7

Each month USDA updates various estimates of supply and demand and revises its moving target for where stocks will end at the end of the marketing year, August 30. The April supply/demand report is still only a discussion of old crop. USDA will not incorporate its first official new crop balance sheet estimates until the May supply/demand report.

Corn: The trade came into today’s report expecting USDA to revise their demand estimates higher. Since January, US corn export sales have run 49% over the five year average. World buyers have drawn from US supplies for two reasons. Brazil has focused on soybean exports. Last year they were trying to fit in both corn and soybean exports. The other reason is concern over Ukraine. Given the current situation for that country, it is likely US exports will remain strong. USDA surprised the trade with a strong 125 million bushel increase in corn exports today. USDA left corn for ethanol production unchanged. Since September 1, production has run 10.8% over last year. This would appear to be over USDA’s current estimate of a 7.6% gain. USDA has been resistant against changing its whole-year estimate as the EPA has yet to release its 2014 biofuel mandate levels. That EPA decision is expected by June. Their analysts decided to leave feed use unchanged. Ending stocks were lowered from 1.456 billion to 1.331. In the grand scheme of things this is quite a bit off the 1.887 estimate USDA posted back in November.

World Numbers: USDA chose to leave their Argentina corn production numbers unchanged at 24 million tonnes. They did increase Brazil from 70 to 72 mt. South Africa, a smaller producer, was increased from 13 to 14 mt. No changes were made to China’s balance sheet (including their 5 mt import estimate). World ending stocks were raised from 158.5 mt to 158.0. This is still an increase over last year’s 134.

Price Expectations: Today’s ending stock number implies $5.10 nearby futures. In other words, the market may have already priced it in. If stocks were lowered only to the average guess of 1.403 billion, that would have implied $4.80 nearby futures. In the coming weeks the market will begin factoring in new crop issues into pricing. This continued lowering of old crop corn stocks has offset some of the bite from the coming new crop supply. Our current new crop discussions for December corn are downside targets of $3.90, above our previous $3.50 target.

 

Soybeans: Everyone in the industry knows USDA had to increase exports. The only question here is how USDA would manage this process over the coming months. Remember that last year, from February through September, the kept their ending stock estimate unchanged at 125 million bushels despite clear evidence that exports were running over their estimate. Recent data shows we have sold 1.635 billion bushels. Shipments total 1.488. USDA did raise their export forecast by 50 million bushels to now 1.580. They did offset much of this increase with a 30 million bushels increase for imports. This is very reasonable considering the widely reported cargoes from South America that are landing on our shores. Domestic use was lowered by 4 million. Ending stocks declined from 145 million bushels to now 135. These change fit into the trade expectation that exports would be moderately offset by other factors. Additionally, don’t forget USDA’s ace in the hole. On the coming September 30 Grain Stocks report don’t be surprised to see them revise the 2013 harvest higher.

World Numbers: They lowered the Brazil soybean production estimate for a second month. This time the decline was 1 million tonne to now an 87.5 total. Much of the private trade is expecting 86 – 86.5. Their Argentina estimate was left unchanged at 54 mt. These numbers likely do not include any damage from recent heavy rains. All China estimates were left unchanged. World soybean stocks declined slightly from 70.6 last month to now 69.4. This is still an increase from last year’s 58.

Price Expectations: Our bullish price target for old crop soybeans was filled weeks ago. The market will continue to trade old crop above that level implied by USDA’s stocks to usage estimates as it believes things are much tighter than USDA will report. Allendale’s new crop price projection, of $12.15 was finally filled last week. We expect sharply lower prices after planting. Also, keep in mind the trade’s clear belief that acreage will end higher than the March 31 Prospective Plantings implied. Our downside target is $9.25 for November.

 

Wheat: USDA increased stocks from 558 to 583 million bushels. Due to the finding of more stocks on the March 31 count of remaining old crop this was expected. USDA adjusted feed and residual and also imports to make the change.

World Numbers: Ending stocks were raised slightly, from 183.8 million tonnes to 186.7. USDA lowered Ukraine and Kazakhstan exports by a combined 1.5 million.

Price Expectations: The trade knows that poor winter wheat conditions in early April do not mean a disaster wheat crop (last year is a good example). If a rain or two hits this week we will be talking back down to $5.26 on the July. If the damage is not corrected, downside is limited to $6.00.

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