Thursday, January 13, 2011
USDA fires up the bullish market
The National Agricultural Statistics Service began its final report on the 2010 crop by lowering the corn production estimate. That was done with a combination of adjusting acreage up to 81.446 million and the yield down to 152.8 bushels per acre. The combination resulted in a production of 12.446 billion bushels, well under the 13+ billion estimates of earlier in the growing season. December 1 corn stocks were estimated at a shade over 10 billion bushels, about 900 million bushels less than year earlier estimates. The domestic carryout at the end of the marketing year in August will be a 20 day supply.
The total drop in corn production was 93 million bushels. The USDA WASDE report cut 100 million bushels from its feed use estimates for corn, but raised ethanol use by 100 million bushels. The ending stocks were estimated at 745 million, which puts the stocks to use ratio at 5.5% and the least since the 5% ratio in the 1995-96 marketing year. The price range for the marketing year was raised 10¢ to $4.90 to $5.70. USDA said, “Heavy early season marketings of corn priced well below current cash price levels are expected to limit the upside potential for the weighted average price received by producers.” For the trading day, March corn closed up 24¢ to $6.31, with December up 12¢ to $5.60 per bushel
Globally, corn production is down by 4.7 million tons from the US and Argentine crops, and global feed grain supplies will be down subsequently from lower production of several coarse grains.
Soybean production estimates were reduced by yield to 43.5 bushels per acre, but acreage was raised slightly to 76.616 million acres, and production was calculated at 3.329 billion bushels. The 30 million bushel cut from November was reflected in the carryout, which is down to 140 million. December 1 soybean stocks were projected at 2.277 billion, pushing the carryout down to a 2 week supply when the marketing year ends in August. For the trading day March beans closed up 58¢ to $14.15, and November beans closed 35¢ higher at $13.08.
The USDA balance sheet for soybeans shows a 46 million bushel drop from November. Subsequently, the crush was lowered by 10 million bushels. However, USDA reported more protein and oil were being produced in the extraction process, so meal and oil production were left unchanged. USDA retained its 1.590 billion bushel estimate for exports. With the carryout declining to 140 million, the average price range was raised a half dollar to $11.20 to $12.20, and USDA added that early season marketings below those price levels will hold back the average for the year.
Globally, oilseed production will be down, both for soybeans and other oilseeds. That is the result of the shorter US and Argentine crops. Global ending stocks are also reduced because of those shorter crops.
USDA reported higher wheat exports than expected, due to reduced competition with lower foreign supplies of milling quality wheat. The 50 million bushel boost in exports helped reduce ending stocks by 40 million bushels. Wheat stocks in the Quarterly Stocks report were not disappearing as quickly as expected. Ending stocks were reduced from 858 million to 818 million bushels. USDA said the marketing year average price would be $5.50 to $5.80 per bushel, with the midpoint of the range up 15¢ from the December supply-demand estimate. March wheat closed up 11¢ to $7.705 and July wheat closed 14.75¢ higher at $8.23.
Global wheat supplies were increased slightly, helped by higher production in Argentina and Brazil. There were significant reductions in production estimates from the Eastern Russian drought and the Australian floods.
Summary:
Reductions in domestic corn and soybean estimates were the primary movers of the market on Wednesday following USDA’s final report on the 2010 US crop. However, increased demand for short supplies, both domestically and globally, will keep a fire under the market until 2011 acreage is known. Price estimates for corn and beans were raised by USDA, which said they would have moved higher, but early sales at lower prices will keep down the average.
Posted by Stu Ellis on 01/13 at 10:02 AM | Permalink