Wednesday, May 8, 2013

Opening Comments 5-8-2013 - USDA Report Estimates


Markets are called mixed/choppy this a.m. behind a choppy overnight session.

In the overnight session old crop corn was down 2 cents a bushel, new crop corn was down 4-5 cents, KC wheat was off ½ of a cent, MPLS wheat was off ¾ of a penny, CBOT wheat was off ½ of a cent, old crop beans up a nickel, and new crop beans up ¾ of a penny.  Outside markets have the DOW futures pointing to a lower start of about 20 points, gold is up about 17 bucks an ounce, the US dollar is off 370 or so points with the June futures at 81.97, and crude is up about a quarter a barrel.

Not tons of new news out this a.m.; we really are in a weather market and wait and see market.  Weather forecasts at any time could spur additional selling pressure or give us a reason to run up.  Wait and see portion is referring to a couple things; first off wait and see what Friday’s USDA report tells us for the balance sheet projections and thus importance of weather and demand.  But secondly wait and see how important weather is based on crop progress over the next few weeks.  Keep in mind that last year despite our drought going on very early the market didn’t really respond until the middle of June and the USDA didn’t acknowledge anything in terms of yields until the July Supply and Demand report.  Last May and June they had the corn yield pegged at over 160 each month; only for it to end up closer to 120 when everything was said and done.

So we need to wait and see how important or how big of a factor our delayed planting is or will be.  Will we actually lose acres?  The bears and guys trading it seem to think not; while producers and bulls seem to think so.  How about effect on yield?  No clue yet; arguments can be made for both sides.  We do know as I stated yesterday that longer we are behind in planting and more potential and more risk premium should be added at some point for things like a frost scare, yield loss, acre loss, old crop tightness, pollination under a heat dome…..etc.  But many of those things are well down the road and frankly if the crop looks huge come July/August will some of them even matter or be material should they happen in isolated spots?

Speaking of the USDA report out on Friday here are the latest estimates I have seen.  The below is coming from the Van Trump Report.



US Ending Stocks 2012/13 

May #
April USDA #
Avg Guess
Range of Guesses
Corn
???
0.757
0.749
0.684 - 0.800
Soybeans
???
0.125
0.123
0.107 - 0.130
Wheat
???
0.731
0.733
0.720 - 0.747

US Ending Stocks 2013/14


May #
Feb Ag Outlook
Avg Guess
Range of Guesses
Corn
???
2.177 
1.993
1.387 - 2.427
Soybeans
???
0.250
0.236
0.147 - 0.325
Wheat
???
0.639
0.658
0.486 - 0.800

Global Ending Stocks 2012/13


May #
April USDA #
Avg Guess
Range of Guesses
Corn
???
125.290
125.646
123.500 - 132.100
Soybeans
???
62.630
62.300
61.111 - 63.000
Wheat
???
182.260
181.528
178.300 - 183.200

Global Ending Stocks 2013/14

May #
Avg Guess
Range of Guesses
Corn
???
151.695
130.000 - 168.300
Soybeans
???
68.991
64.000 - 83.000
Wheat
???
184.368
175.000 - 195.800

US Wheat Production


May #
2012 Totals
Avg Guess
Range of Guesses
All Wheat
???
2.269
2.062
1.832 - 2.190
All Winter
???
1.646
1.497
1.359 - 1.604
Hard Red Winter
???
1.004
0.776
0.676 - 0.875
Soft Red Winter
???
0.420
0.504
0.473 - 0.636
White Winter
???
0.222
0.217
0.204 - 0.226

South American Production


May #
April USDA #
Avg Guess
Range of Guesses
Brazil Corn
???
74.000
74.708
73.000 - 77.500
Brazil Soy
???
83.500
82.807
81.500 - 83.500
Argentine Corn
???
26.500
25.583
24.000 - 26.500
Argentine Soy
???
51.500
50.714
48.500 - 51.500






The big thing that stands out to me is the projected guesses for the 2013/14 balance sheet estimates you will notice that both the corn and bean numbers for the 2013/14 carryout are nearly double that of the present carryout.  The bigger question should be are we already trading that type of carryout??………if not how low could prices go?  The other important question is how realistic are those numbers that we get on Friday going to be?  Will the USDA be aggressive and overstate yield potential like they have for the past couple of years?  What about on the flip side will they be overstating demand?

Bottom line is we could get just as many questions as answers on Friday’s report; but it will be what the market trades and should really give us direction as to the importance to some of the factors that we will see as we move forward.  Such as weather and demand.

The other big thing on the report will be wheat production and the world numbers.  The US numbers took a back seat last month because of the massive increase we seen in the world corn carryout numbers.  If you remember the USDA numbers came in a good 100 million bushels less than the average estimate for old crop corn carryout yet we didn’t manage much of a gain because of the increase in world numbers.  The USDA will tell the traders how important our piece of the pie is versus the rest of the world and as we move forward we will need to keep in mind that old saying looking out our back yard.  But now we have to look at both the rest of the United States but also the rest of the world. 

Other news to watch include ethanol numbers out today at 9:30; hopefully we can continue our trend that we have had the past few weeks.  Tomorrow we will have export sales out and the past few weeks have seen beans being negative; it would be nice to see that trend change.

Other headlines I did notice today include China buying more new crop US Soybeans.  South Korea buying more South American corn and Chinese soybean imports down in April.

Please give us a call if there is anything we can do for you.

Thanks


Jeremey Frost
Grain Merchandiser
Midwest Cooperatives

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