USDA Report Preview: It’s All About the Benjamins


by Darin Newsom, DTN Senior Analyst


OMAHA (DTN) — The title of this article makes sense if you recall an episode of the classic TV show “Mash” in which crazy Colonel Flagg accuses Frank Burns of reading a communist magazine, “Reader's Digest,” which becomes “Red's Digest” if you remove the third, fifth and sixth letters of Reader's. Similarly, you'll see what the March WASDE report is all about if you remove the third, fourth, sixth and seventh letters of Benjamins.


It's all about the beans, baby.


USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CDT Monday, March 10.




How many of you like a good magic act? If so, you are in luck, as USDA will likely be forced to pull off a trick just this side of David Copperfield to keep soybean domestic stocks-to-use above its floor of 4.5{75f28365482020b1dc6796c337e8ca3e58b9dd590dc88a265b514ff5f3f56c30}. You don't believe me? Four out of the last six marketing years, including 2013-2014, 4.5{75f28365482020b1dc6796c337e8ca3e58b9dd590dc88a265b514ff5f3f56c30} has been the magic bottom-line number. However, this year's round accounts for export demand projected at 1.51 billion bushels. USDA's own weekly export sales and shipment reports show total sales of beans through the end of February of 1.623 bb and shipments already at 1.366 bb.


As DTN Contributing Analyst Joel Karlin pointed out in a recent blog, the smallest amount of soybeans shipped from late February through the end of the marketing year was 185 million bushels in 2003-2004. To come in at USDA's February estimate, the U.S. could only ship 184 mb through the balance of the marketing year. On the other hand, average shipments for the last half of the last 10 marketing years is 378 mb. Adding to what USDA has already reported for this marketing year puts the total at — are you ready for this? — 1.7 bb.


February's domestic ending stocks estimate of 150 mb would not support this possible increase of 190 mb of export demand. Particularly if you recall that 10 mb of 2012-2013 exports are still missing, lowering that year's ending stocks and 2013-2014 beginning stocks by a like amount. Theoretically, that means the U.S. ending stocks situation is likely closer to 140 mb, meaning a possible 50 mb shortage if an average pace of shipments is seen for the balance of the marketing year.


USDA can't have that, won't have that. Therefore, changes will and won't be made. What I mean is, it is unlikely that a dramatic increase is seen in the March export demand projection, maybe up to 10 mb, but no more. Also, do not be surprised if 20 mb or so is subtracted from residual use, as it is not unusual for this category to fall into negative numbers, as large as needed to maintain the 4.5{75f28365482020b1dc6796c337e8ca3e58b9dd590dc88a265b514ff5f3f56c30} ending stocks level.


One last thing on soybeans: Global production is expected to decrease with average pre-report estimates whittling about 1.9 million metric tons from Brazil down to 88.1 mmt and 0.4 mmt from Argentina to 53.6 mmt. If so, the expected decrease in global ending stocks of about 1.5 mmt may be a little light.




It isn't often that corn takes a back seat to any market, but the March USDA report could certainly be one of those occasions. Domestic ending stocks are expected to increase, slightly, to 1.487 bb from the February projection of 1.481 bb. The most likely reason could be a tip of the cap to the idea that the jump in export demand estimates to 1.6 bb may have been a bit steep. Through the end of February, U.S. shipments continue to run 4{75f28365482020b1dc6796c337e8ca3e58b9dd590dc88a265b514ff5f3f56c30} behind the projected pace, opening the door for a possible small decrease in the March report. Globally, corn ending stocks are expected to be trimmed by about 0.8 mmt.




As usual, there doesn't seem to be much to get excited about in wheat. Global ending stocks are expected to stay near 184.4 mmt. However, given that Canadian stocks remain on ice and U.S. exports are running 3{75f28365482020b1dc6796c337e8ca3e58b9dd590dc88a265b514ff5f3f56c30} ahead of average pace through the end of February, USDA could bump up its export demand projection slightly in March. If so, this could actually reduce domestic ending stocks by maybe 10 mb as compared to the pre-report average estimate of 568 mb, up 10 mb from February. Also, it will be interesting to see if there are any changes to supply and demand in Russia and Ukraine. There isn't expected to be in this WASDE report, but possibly down the road depending on developments.




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Posted with DTN Permission by Haylie Shipp




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