Record Brazilian soybean crop expected
Major changes for U.S. corn, soybean, and wheat ending stocks were not expected prior to the Feb. 8 release of The World Agricultural Supply and Demand Estimates report. By far, the most surprising change in the WASDE report was the increase in wheat feed use, says Lisa Elliott, SDSU Extension commodity marketing specialist, of her WASDE report summary.
Below Elliott summarizes the reports impact on South Dakota commodities.
Prior to the report, the average market estimate for wheat ending stocks was 728 million bushels, increasing from January's report.
However, in the report, U.S. wheat ending stocks decreased by 25 million bushels to 691 million bushels. This was due to the feed/residual figure being increased to 375 million bushels. The feed/residual figure has not been that high since 1998 when it was around 400 million bushels, with the 10 year average being around 175 million bushels. World wheat ending stocks remained nearly unchanged, despite some market analysts expecting that Australia's production would be decreased from the 22 million metric tons.
Prior to the report, market analysts' expectations for ending stocks ranged from 502 million bushels to 667 million bushels. In the report, U.S. corn ending stocks was estimated at 632 million bushels, an increase of 30 million bushels from the January report.
The adjustment was made due to changing demand side numbers. Exports decreased by 50 million bushels to 900 million bushels. The only other adjustment on the demand side was that food/seed/industrial increased by 20 million bushels. World corn ending stocks increased by about 2 million metric tons due in part to Brazil's and Mexico's production being increased by 1.5 and 0.8 mmts., respectively.
The average market estimate for U.S. soybean ending stocks was 140 million bushels. In the report, U.S. soybean ending stocks decreased by 10 million bushels from the January report to 125 million bushels.
This tighter position was the result of the crush figure being increased by 10 million bushels. This puts stocks-to-use at 4.1 percent with the 10-year average being 7.9 percent. Stock-to-use has not been this low since 1964. World soybean ending stocks were increased by 0.66 mmt., due to Brazil's production being increased by 1.5 mmt., while Argentina's production was decreased by 1 mmt.
The February WASDE report reinforces that the U.S. corn and soybean supplies will be tight until the new crops are realized. The report also suggests that feed demand has continued to remain strong into the New Year.
Despite, a strong domestic crush and export demand for soybeans, the record crop expected out of Brazil weighed on soybean prices on Feb. 8 to put March soybean futures down 34 cents to close at $14.52. According to the USDA export sale report, U.S. soybean sales for the 2012-2013 marketing year are at 93.5 percent of the USDA's export estimate (1.345 billion bushels) versus the five year average of 78.2 percent. Therefore, the U.S. export pace will continue to be monitored in the upcoming weeks. USDA expects the U.S. export pace to decrease greatly over the upcoming months due to Brazil's expected record soybean crop. They expect that Chinese and other world soybean importers will be able to meet their demand by turning to Brazil and Argentina in the coming months.
The market will focus on Brazil and Argentina realizing their record crops and being able to logistically export this record crop. November soybean contract was particularly hurt because the large South American exportable supplies, coupled with limited export infrastructure, are expected to carry over into the U.S. new crop year and compete with U.S. new crop export demand in the November period.
As we wait for the next WASDE report which will be released on March 8, we will see if our export pace starts to decrease over the weeks between the reports. If not, we may see an increase in the U.S. soybean export figure in the next report. To review January's report summary, visit http://igrow.org.