USDA grain stocks summary
January 20, 2014
The USDA grain stocks and World Agricultural Supply and Demand Estimates (WASDE) reports were released Jan. 10; and according to Dr. Lisa Elliott, SDSU Extension Commodity Marketing Specialist, the pre-report market expectations were not met.
"Expectations were that the corn market production and ending stocks would be increased from the December WASDE report. However, the market reports revealed estimates for corn contrary to expectations for both production and ending stocks," she said. "Meanwhile, it was expected the ending stocks for wheat would be decreased, however, the reports showed wheat ending stocks increased from the December WASDE report."
Elliott shares a report summary below.
Prior to the U.S. grain stocks report, market analysts expected corn stocks at 10.8 billion bushels for the first quarter of the 2013-2014 marketing year. U.S. corn stocks measured close to 400 million bushels less than market expectations at 10.4 billion bushels. The reduced corn stocks were reportedly due to a reduction of 1.6 bushel per acre in yield for 2013 to 158.8 bushels per acre, coupled with an increase in usage. The overall corn usage for the first quarter (September 1- December 1) was record large at 4.32 billion bushels (see Figure 1).
The larger than expected first quarter corn usage was incorporated into expected annual increases to feed/residual by 100 million bushels and to ethanol use by 50 million bushels. This resulted in expected 2013/2014 corn ending stocks being lowered (by 161 million bushels) to 1.6 billion bushels. The stocks-to-use percentage was lowered (by 1.3 percent from the December report) to 12.4 percent, which is close to the 10 year average.
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Despite an estimated record corn crop of 13.93 billion bushels, first quarter ending stocks of 10.4 billion bushels was below the largest December corn ending stocks on record of 10.9 billion bushels, in 2009, when we had the second largest production of corn estimated at 13.1 billion bushels. The percentage of estimated corn supply at off-farm locations is slightly above average at 27 percent versus a five-year average of 26 percent, while on-farm corn supply, as a percentage of total supply, is below average at 43 percent versus five-year average of 45 percent.
U.S. wheat stocks measured 1.46 billion bushels, which was 60 million bushels more than the market analysts' expected.
As a result, the WASDE report lowered expected wheat feed/residual (by 60 million bushels) to 250 million bushels for the 2013/2014 marketing year. However, exports were increased by 25 million bushels. The overall impact to the balance sheet resulted in ending stocks being increased (by 33 million bushels) to 608 million bushels. This was counter to market expectations prior to the report that wheat ending stocks number would fall further to 557 million bushels.
U.S. soybean stocks measured 2.15 billion bushels, which was 11 million bushels less than the market analysts expected.
The WASDE report revealed a slightly higher soybean production estimate as compared to the December report. Soybean production was estimated at 3.29 billion bushels, which was (31 million bushels) higher than December's estimate. This production estimate was increased due to yield being increased slightly by 0.3 bushels per acre.
The increase in production was offset on the demand side with the crush and exports figures both being increased by 10 million bushels and 20 million bushels, respectively. This resulted in ending stocks remaining unchanged at 150 million bushels.
The overall market impacts were: bullish for corn, bearish for wheat, and neutral for soybeans. Market participants will continue to monitor South America weather to determine production of soybeans and corn in Brazil and Argentina, market participants will also continue to monitor export pace, ethanol and soybean crush, and be contemplating planted acres and demand for new crop corn and soybeans in this upcoming growing season.
The corn market responded positively after the report and closed near the highs for the day. Speculators still maintain a large short position in corn and may begin to reduce those short positions going into planting season where weather may become a factor again.
The next big reports will be the USDA outlooks in February, the March 31st quarterly stocks estimate and prospective planting reports. Other potential market movers may be a final ruling on the Renewable Fuels Standard (RFS) by the EPA.