By Darin Newsom, DTN Senior Analyst
OMAHA (DTN) — The May USDA Supply and Demand and WASDE reports should not only tighten up end-of-the-marketing-year 2010-11 stocks projections, but should offer us an initial look at 2011-12 numbers. The May report often sets the tone for the rest of the spring and summer in regard to price direction, with this year’s numbers made all the more interesting by last week’s noncommercial-led sell off.
2010-2011 U.S. ENDING STOCKS
Corn is expected to drop to 665 million bushels from the April estimate of 675 mb. Such a decrease, though small (10 mb), would take the U.S. ending stocks-to-use ratio to a new low below the 5{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2} estimated in 1995-96. This should be viewed as bullish.
Soybean ending stocks, on the other hand, are expected to increase by about 13 mb due to decreased export demand. If so, this would increase the U.S. ending stocks-to-use ratio to about 4.6{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}. This would be considered bearish.
Domestic wheat ending stocks are also expected to increase slightly (5 mb) due to decreased export demand, bumping its ending stocks-to-use ratio to 34.4{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}. This would be seen as neutral to bearish.
2011-2012 U.S. ENDING STOCKS
The initial look at new-crop ending stocks often proves to be nothing more than a wild guess. This year, with so many variables coming out of 2010-11 and looking forward into 2011-12, the estimates are even more questionable.
As it stands, corn ending stocks are expected to increase to 811 mb. If this number is still based on 192.2 million acres and yield of 161.7 bpa, it would imply a total demand increase of only 100 mb, putting ending stocks-to-use at a still tight 6{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}.
Soybean ending stocks are expected to climb to 176 mb. To reach that, assuming acreage of 76.6 million acres and yield of 43.4 bushels per acre, total demand would have to drop to about 3.276 billion bushels, leaving ending stocks to use at roughly 5.4{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}.
2011-2012 WINTER WHEAT PRODUCTION
All wheat production is expected to fall from USDA’s Ag Outlook Forum estimate of 2.08 bb to 2.042 bb. If acreage is left unchanged at 57 ma, and it should be, then average yield is expected to decrease by only 0.8 bpa to 43 bpa. This number seems almost ludicrous given the weekly winter wheat crop condition numbers that show a crop running below 2002 levels when average yield came in at only 38.2 bpa. All winter wheat production is pegged at 1.389 bb, though DTN’s estimate comes in at 1.202 bb.
2011-2012 WHEAT ENDING STOCKS
Pre-report estimates have new-crop wheat ending stocks pegged at 674 mb, down 170 mb from the 2010-2012 pre-report estimate. Using the abovementioned acreage figure of 57 ma and yield of 43 bpa, then total demand could be projected at about 2.323 bb, down about 132 mb from 2010-2011 with the biggest decrease seen in exports due to possible strength of the U.S. dollar index and increased global production expectations. A move by the Federal Reserve, increasing the Fed Fund rate later in 2011, could provide fundamental support to the U.S. dollar index that has been lacking, giving it a reason to move higher.
2010-2011 WORLD ENDING STOCKS
Recent trends in global ending stocks are expected to continue with increases seen in both wheat and soybeans while corn and coarse grain stocks continue to fall. There is a chance the world corn ending stocks number could approach 120 million metric tons, dropping ending stocks to use to about 14.3{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}.
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Posted with DTN Permission by Haylie Shipp
