USDA Crop Reports Preview 12/10 15:47
While there won't be much new information behind this month's crop
production and supply and demand reports from USDA, it's unwise to rule out
surprises, such as lower ending stocks, that could move volatile markets.
By Elaine Kub
DTN Analyst
OMAHA (DTN) -- Government economists won't have had access to much fresh
production information about soy, corn or wheat since November's USDA reports,
so large adjustments to production numbers aren't widely expected until
January's crop production report. However, the fast pace of exports could make
USDA feel obligated to bullishly tweak ending stocks figures lower in
December's supply and demand report to be released Tuesday morning.
Therefore, it would be unwise to rule out surprises, as volatile market
conditions have set up the futures trade for quick movements.
As of November 9, USDA saw U.S. ending stocks at 1,899 million bushels for
corn, 210 mb for soybeans and 312 mb for wheat. World ending stocks were pegged
at 110 million metric tons for corn, 49 mmt for soybeans and 109.9 mmt for
wheat.
The underlying usage factors that could be changed to alter those ending
stocks estimates include U.S. ethanol use for corn (pegged at 3,200 million
bushels for two months in a row), biodiesel use for soybeans (4.2 billion
pounds of soybean oil) and exports (2,350 mb for corn; 975 mb for soybeans, and
1,150 mb for wheat). Given that current accumulated export sales have already
reached 90 percent of the expected total for wheat and over 60 percent for the
row crops, at some point the government is likely to change its expectations
for the 2007-2008 marketing year.
Meanwhile, Tuesday's crop production report will provide a summary only for
the cotton crop. Depending how bearish the outlook for cotton remains, this
crop could once again give up acres to corn and soybeans in spring 2008. Prices
in the cotton market have been trending lower throughout the past month, but
that has been a reaction to bearish fundamentals long known by traders. The
overall trading volume was light last week, suggesting noncommercial
(speculative) traders were not especially eager to take positions based on
their predictions for Tuesday's report. In November, USDA made a bearish
adjustment to its cotton production forecast, pegging it at 18.9 million bales.
The numbers from Tuesday's World Agriculture Outlook Board will come out
more than a week after the Australian Bureau of Agricultural and Resource
Economics (ABARE) announced its projection for 12.7 mmt of wheat to be
harvested in Australia; USDA has a long-standing prediction of 13 mmt of
Australian wheat production. Additionally, Stats Canada said Thursday that
Canada produced 14.7 mmt of non-durum wheat, and the country's canola
production figure was also below the five-year average. IBGE's (the Brazilian
statistics agency) estimate for Brazilian soy production as of Monday the 10th
was 58.35 mmt. Meanwhile, Argentina has decided to keep its export registry
closed until Christmas, but this is not earth-shattering for world grain trade
in the long term.
As we wait for any market reaction to Tuesday morning's numbers, it's
important to bear in mind how vulnerable markets have become to volatile
movement. Corn, soybeans and wheat all saw bullish interest from investors last
week, developing short-term higher trends consistent with the expectation for
decreased stocks figures. The soybean market has been buoyed by a huge net-long
futures position built up by noncommercial (speculative) traders. That support
may remain as long as -- but only as long as -- there is fundamental
uncertainty about South American production.
Also, watch for an interest rate decision from the Federal Open Market
Committee (FOMC) Tuesday afternoon. Anticipation of that could spark some
jittery trade in outside markets, and soybean and grain markets are vulnerable
to spillover macroeconomic uncertainty.
Elaine Kub can be reached at elaine.kub@dtn.com.
U.S. ENDING STOCKS 2007-2008 (million bushels)
Avg. High Low
Dec. Nov. Est. Est. Est. 2006-07
Corn 1,897 1,879 2,085 1,750 1,304
Soybeans 210 197 210 144 573
Grain Sorghum 57 55 59 43 32
Wheat 312 296 319 262 456
WORLD ENDING STOCKS (million metric tons)
2007-2008 2006-2007
Dec. Nov. Dec. Nov.
Wheat 109.80 124.06
Corn 110.39 104.98
Soybeans 49.35 62.08
WORLD PRODUCTION (million metric tons)
2007-2008 2006-2007
Dec. Nov. Dec. Nov.
Brazil soybeans 62.0 59.0
Argentine soybeans 47.0 47.2
Argentine corn 22.5 22.5
Brazil corn 50.0 51.0
Australia wheat 13.0 9.9
Canada wheat 20.6 25.3
(AM)
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