by Darin Newsom, DTN Senior Analyst
OMAHA (DTN) — There aren’t a lot of surprises expected in the April round of USDA numbers, with the most anticipated categories being South American corn and soybean production. U.S. ending stocks are expected to decline in all three grains, though this bullishness may have been tempered by the recent quarterly stocks report.
USDA will release its April Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 7:30 a.m. CST Tuesday.
WORLD PRODUCTION AND ENDING STOCKS
Corn: Brazilian corn production is expected to fall from the March estimate of 62 million metric tons to 61.8 mmt, while Argentina’s crop is expected to be trimmed by 0.5 mmt. If these are the only changes made and global demand remains at 869.49 mmt, global ending stocks could decline below 125 mmt, putting ending stocks to use at approximately 14.3{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0}, basically unchanged from March.
Soybeans: Global soybean production is expected to fall, due in large part to continued reductions in South America. Pre-report estimates pegged Brazilian production at 67 mmt as compared to the March WASDE figure of 68.5 mmt. Similarly, Argentina is now expected to see a crop of 45.3 mmt vs. the March estimate of 46.5 mmt. Other decreases are expected to be seen in global production, though it is unlikely a similar decrease to what was seen in March will occur in global demand. Given this scenario, it is possible global ending stocks could fall below 54.5 mmt with ending stocks-to-use dipping to about 21.4{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0}.
Wheat: Global wheat ending stocks are expected to remain cumbersome, with only a minor change from the March WASDE estimate of 209.58 mmt. If so, this would keep ending stocks-to-use at a robust 30{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0}-plus, keeping the long-term supply and demand situation bearish.
2011-2012 US ENDING STOCKS
Corn: Domestic corn ending stocks are expected to fall from the March estimate of 801 million bushels to 717 mb, or a decrease of 84 mb. If this occurs, it will most likely be due to increased demand in exports and possibly feed, while ethanol demand is expected to hold steady at 5.0 billion bushels. A decrease of this size would drop domestic ending stocks-to-use to 5.6{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0}, closing in on the all-time low of 5.0{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} from the 1995-1996 marketing year and well below the 6.3{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} estimated in March.
Soybeans: Export demand remains strong for domestic soybeans and, given the expected decreases in South American supplies, U.S. ending stocks are projected to drop by almost 30 mb from March to 246 mb. If realized, this could put ending stocks-to-use near 8.1{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0}, a full 1.0{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0} below what was calculated in March.
Wheat: The expected decrease in domestic ending stocks of all-wheat seems to run counter to what was indicated in the March 30 quarterly stocks report. However, since March 1, domestic feed demand may have increased while export demand has been firm if unspectacular. Despite the projected smaller ending stocks of about 29 mb, domestic ending stocks to use could still be calculated at a burdensome 36.4{fd15d42d1b024b97d6d50958be27cc8145b6addb99e015780abccf2984117bb0}.
THE MARKET’S VIEW
Corn: Action in the May-to-July futures spread over the month of March showed a move from a weak carry to a small inverse. At the time, this implied demand was likely pulling down ending stocks, an implication that could be seconded if USDA’s domestic ending stocks number comes in as projected and global ending stocks are also trimmed.
Soybeans: The carry in old-crop May-to-July soybean futures spreads weakened almost 2 cents during the month of March, indicating a more bullish commercial outlook at the end of the month. The lower pre-report estimate for domestic and global ending stocks would seem to concur with what was seen in the market last month, though the situation has continued to tighten in April.
Wheat: Futures spreads and national average basis levels over the course of March indicated a slightly less bearish commercial outlook at the end of the month. Pre-report estimates of slightly reduced domestic and global ending stocks would seem to concur with market signals.
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Posted with DTN Permission by Haylie Shipp
