OMAHA (DTN) — USDA loosened corn’s 2010-11 ending stocks, reporting 730 million bushels, compared with 675 in April. In its initial look at 2011-12 supply-demand, USDA showed stocks increasing for corn, grain sorghum and wheat, while they expect slightly lower soybean stocks.
“Overall, the U.S. ending stocks report should be considered bearish for corn, neutral to bearish for soybeans and wheat,” said DTN Analyst John Sanow.
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2010-2011 U.S. ENDING STOCKS
Corn is expected to increase to 730 million bushels from the April estimate of 675 million bushels (mb). This takes the U.S. ending stocks-to-use ratio to a still-tight 5.4{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}.
Soybean ending stocks also increased, to 170 mb, from the April estimate of 140 mb, due to a 10 mb decrease in exports and 11 mb reduction in the residual category. The stocks-to-use ratio is 5.1{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}.
Domestic wheat ending stocks remained unchanged at 839 mb, meaning the ending stocks-to-use ratio is a touch tighter at 34.2{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}.
2011-2012 U.S. ENDING STOCKS
Because of the uncertainty regarding production in May, the initial look at new-crop ending stocks is strongly based on historical averages and current conjectures. This year, given acreage uncertainty and wild markets looking forward into 2011-12, the estimates are even more tentative.
As it stands, corn ending stocks are expected to increase to 900 mb. USDA used the 92.2 million bushels reported in the Prospective Plantings report and a below-trend yield of 158.7 bushels per acre. Total use was trimmed from 1.345 billion in 2010-11 to 13.355 for the new crop. Ending stocks-to-use would be 6.7{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}.
“With corn stocks raised larger than expected — 65 mb for 2010-2011 and 89 mb for 2011-2012 — pressure could develop during Wednesday’s session. However, the longer-term picture remains bullish,” said Sanow. “And even though USDA lowered their trendline yield projection, some will question whether the new-crop ending stocks number is overstated due to a possible loss in acreage.”
Soybean ending stocks are expected to drop to 160 mb. To reach that, assuming acreage of 76.6 million acres and yield of 43.4 bu./acre, total demand was pegged at 3.31 billion bushels, leaving ending stocks-to-use at just 4.8{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}.
“It was a mixed bag for beans, as old-crop ending stocks were increased by 30 mb while new-crop came in 16 mb below the average estimate. This keeps the margin for error in new-crop production razor thin,” Sanow said.
WINTER WHEAT PRODUCTION
At 1.424 billion bushels, winter wheat production was projected down 4{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2} from last year’s 1.485, with 32 million acres for harvest (up 1{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2} from last year) and a yield of 44.5 bu./acre, down from 46.8 bu./acre last year. Reflecting the prolonged and severe drought, Texas will harvest only 1.8 million acres, down from 3.75 million last year, at a yield of only 26 bu./acre, down from 34. Likewise, Kansas yield is estimated at 34 bu./acre, down from 45, and acres slipped to 7.7 million from last year’s 8 million.
2011-2012 WHEAT ENDING STOCKS
Pre-report estimates had new-crop wheat ending stocks pegged at 674 mb, down 170 mb from the 2010-2012 pre-report estimate. USDA’s figure came in at 702 mb, based on 58 million acres and a yield of 42.5 bu./acre. Total demand is pegged at 2.29 bb, down 165 mb from 2010-2011, mainly due to a 225-mb reduction in exports.
“Wheat traders may take the 2011-2012 ending stocks number with a grain of salt,” Sanow said. “Since the production number of 2.043 bb for all wheat was calculated, weather has continued to decimate the Southern Plains wheat crop while massive planting delays remain in the Northern Plains. This means the new-crop ending stocks number will likely be looked upon as overstated.”
2010-2011 WORLD ENDING STOCKS
Global ending stocks are expected to increase in 2011-12 for corn, while they will fall for wheat and soybeans. At 129.14 bb, corn world stocks-to-use will be 15{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}. Soybean stocks to use is 23.5{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}.
“The world situation in grains grew more bearish for beans and should be considered neutral to bearish for corn and wheat,” Sanow said. “Global old-crop stocks came in almost 3 mmt above the April projection in part tied to record-setting production in Brazil of 73 mmt.
“Old-crop world supplies for corn and wheat dropped slightly while new-crop corn came in almost 7 mmt higher than the 2010-2011 estimate. As with domestic wheat, traders may question whether the world number is too high given the weather events not just domestically but in areas such as Canada and Europe.”
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Posted with DTN Permission by Haylie Shipp
