USDA Report Review
Grain Piles Not as Big as Expected
Heading into the March round of USDA Supply and Demand reports, the general consensus was that both domestic and global ending stocks would increase. Instead, estimates for world stocks of all three major grains decreased from February with total demand increased for corn and soybeans, and total supplies trimmed for wheat. Domestic ending stocks numbers were a non-event with corn, wheat and grain sorghum unchanged from February while soybean ending stocks were increased by 10 million bushels.
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Starting with corn, the U.S. supply and demand table was left unchanged, meaning ending stocks held at 1.837 billion bushels. The average pre-report estimate was calculated at 1.860 bb. This could be viewed as a bit surprising given the slow pace of exports, both sales and shipments, seen over the first half of the 2015-2016 marketing year. It seems possible that USDA is waiting for its own quarterly stocks numbers at the end of the month before moving ahead with adjustments. Globally, demand increased 0.33 million metric tons while total supplies were trimmed 1.51 mmt. The end result was an ending stocks estimate of 206.97 mmt, below the low end of pre-report estimates of 207.20 mmt and last month's 208.80 mmt. The ending stocks-to-use ratio decreased slightly from 21.6% to 21.4%.
Domestic soybean ending stocks increased 10 mb on a like decrease in crush demand. This marks the second consecutive month of a 10 mb trimming of crush while exports continue to hold at 1.69 bb. Globally, ending stocks were pegged at 78.87 mmt, well below last month's 80.4 mmt and also below the low end of pre-report estimates of 80 mmt. Most of the change was due to an increase of 1.23 mmt in demand, most notably a 1.1 mmt projected increase from China. Global production decreased slightly with both Brazil (100 mmt) and Argentina (58.5 mmt) unchanged from February.
The estimate for domestic wheat ending stock was left at 966 mb, again curious given the sloth-like pace of export sales and shipments 75% through the 2015-2016 marketing year. An argument could have been made for another decrease in exports of 25 mb to 50 mb. The fact such a move didn't occur leaves the door open for cuts in subsequent reports, again with USDA likely waiting for the results of the Quarterly Stocks report at the end of March. Globally, wheat ending stocks were projected at 237.59 mmt, down slightly from February's estimate of 238.9 mmt. Much of this was due to an expected decrease in India's production from 88.9 mmt to 86.5 mmt, offset in part by a 2.05 mmt decrease in global demand.
Based on these numbers, the March reports could have been viewed as neutral-to-bullish for all three grains. Yet shortly after the release, all three markets were on the defensive and making new lows for the day. Yes, grain piles -- both domestic and global -- were smaller than expected, but the bottom line is all three continue to show cumbersome levels of ending stocks-to-use. Corn demand did not increase significantly, South American production of soybeans was not trimmed, and global demand for wheat actually decreased. It still looks like it will take something weather related to break the grain complex out if its ongoing doldrums.
Darin Newsom can be reached at darin.newsom@dtn.com
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