March USDA report: Bulls for beans, bears for cotton
Expect bulls for beans and bears for cotton on the tails of the March 9 Supply-Demand report from the U.S. Department of Agriculture, said Scott Stiles, Extension economist for the University of Arkansas System Division of Agriculture.
With drought hammering Brazil and Argentina, all eyes were on South America's soybean production estimates, which were lower, as expected. Brazilian production was pegged at 68.5 million metric tons, down 3.5 million metric tons from the February estimate. Argentine soybean production was put at 46.5 metric million tons, down 1.5 million metric tons from February.
"The soybean market will remain supported on today's lower estimate of Brazilian soybean production," Stiles said, adding, "We may see some profit-taking today, given the fact the report didn't provide any shock value."
Part of the absence of shock value is due to how well the market anticipated the cuts. November soybean futures were up 81 cents since Feb. 1. "There's a good chance that the market has mostly factored in the cuts USDA made in its South American crop estimates," he said.
"However, the fact remains that the world soybean stocks-to-use ratio is now 22 percent, which is where we were back in 2007-2008, when soybean futures spiked to over $16 mid-2008," Stiles said. "That's not a prediction, but just a reminder of how tight the world soybean supply situation has become in a relatively short amount of time. Any setbacks in soybean futures today will continue to be supported given the current supply situation."
The report also had more bearish news for cotton.
"U.S. ending stocks were increased 100,000 bales to 3.9 million on lower domestic mill use," he said. "World ending stocks were raised just over 1.5 million bales to a total of 62.3 million. That's the highest world ending stocks figure since 2006."
Despite the uproar from various domestic and international entities including China, the latest news from India confirms their cotton export ban will remain in place. No benefit to U.S. export demand was reflected in this month's USDA report.
In corn, Stiles said, "futures can't drift too far behind, as the U.S. needs additional corn acres this year. As of late, it seems new crop corn is struggling to move higher, with the ideas of 2 to 3 million more acres this year and a fast start to planting."
Here in the U.S., 2011-2012 ending stocks for corn and soybeans were left unchanged at 801 and 275 million bushels, respectively. All wheat ending stocks were lowered to 825 million bushels versus last month at 840. Wheat ending stocks were reduced a bit due to slightly higher exports.