by John Sanow, DTN Analyst
OMAHA (DTN) — If pre-report estimates are on the money, the market should pay little attention to Friday morning’s World Agricultural Supply and Demand Estimates report.
Expectations for U.S and global ending stocks are showing only slight changes to both the domestic and global balance sheets. However, there may be some surprises lurking that could be construed as bearish by the time the dust settles.
USDA will release its December Crop Production and WASDE reports at 7:30 a.m. CST Friday.
U.S. ENDING STOCKS
Corn: 2011-2012 ending stocks are expected to decrease by 5 million bushels from the November estimate with a possible drop in exports more than offset by a jump in feed demand. In other words, a ho-hum number, which is what the December report typically amounts to, heading into the more explosive January report. However, it wouldn’t be surprising to see an increase instead, given the recent action in spreads that has seen the carry strengthen, indicating a less bullish commercial outlook longer term.
Soybeans: If the WASDE report comes in near expectations, soybeans will have the most bearish number out of the three grains. The average pre-report estimate came in at 213 mb, 18 mb above the November number. This increase is expected to come in the form of reduced exports and crush. With the carry in futures spreads remaining strong, reflecting a bearish commercial outlook, the market seems to have no qualms with another build in domestic stocks.
Wheat: If the WASDE report comes in where analysts expect — 830 mb against the November number of 828 mb — there should be little reaction by market participants. This means wheat should continue to trade its bearish market structure. However, as is the case with corn, it wouldn’t be shocking if Friday morning’s domestic number came in above expectations given the continued strengthening in Chicago futures spreads.
WORLD ENDING STOCKS
Corn: Global ending stocks are expected to increase only slightly to 121.9 million metric tons from November’s 121.6 mmt. If there is any surprise to be had Friday, it could be here. Larger estimates from China, Argentina and Brazil recently could lead USDA to make bigger changes than expected.
Soybeans: Pre-report estimates calling for a marginal decrease in global ending stocks of 0.58 mmt seems counterintuitive given the expected rise in domestic stocks coupled with headlines recently littered with projections for increased production in South America. Again, this is another spot where USDA could pull a surprise out of its hat.
Wheat: Global stocks for all wheat are expected to increase slightly. Similar to the other grains, this projection may be on the low side, given larger production numbers coming out of Australia and Canada. Regardless, there is one certainty with Friday’s report: It will confirm world supplies remain more than adequate to meet needs in 2011-2012.
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Posted with DTN Permission by Haylie Shipp