USDA Reports Preview
Demand Change
Corn and soybeans are deep enough into the 2016-2017 marketing year for USDA to finally adjust export demand, sending ripple effects across both domestic and world ending stocks.
USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CST Thursday.
U.S. ENDING STOCKS
Domestic corn ending stocks are expected to decrease, slightly, in USDA's February Supply and Demand report. The average pre-report estimate came in at 2.342 billion bushels, only 13 million bushels less than what was projected in projected in January. Meanwhile, export shipments continue to run 65% ahead of last year's pace as compared to USDA's ongoing call for a 17% year-to-year increase in export demand. Similarly, the average estimate for domestic soybean ending stocks came in at 409 mb, down from USDA's January projection of 420 mb. The latest marketing-year total shipments data shows exports running 21% ahead of last year versus USDA's seemingly conservative estimate of a 6% year-to-year increase.
Given this data, and the fact the marketing year for both is nearing its mid-point, the time has come for USDA to change its demand projections. If it doesn't, or if it does so only moderately as suggested by pre-report estimates, does it imply continued concern that both corn and soybeans are going to see a sharper-than-normal demand drop-off the second half of the marketing year? And, if so, why would that concern be so prevalent?
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WORLD PRODUCTION
This category should be the second-most-watched in USDA's February round of reports. The last couple of months have seen a great deal of talk of Brazil's monster soybean crop getting bigger, while Argentina's wet-footed soybean crop should start to see production reductions. Both could play out in the February WASDE report, though pre-report estimates came in on the conservative side.
There have been rumblings that Brazilian soybean production could ultimately reach 108 million metric tons, though it is highly unlikely this month's WASDE report strays that far from its January estimate of 104 mmt. On the other hand, the average pre-report estimate of 104.1 mmt is almost laughable given the data that is supposedly out there. On the other hand, Argentina's soybean crop has been widely assumed to have lost 5% due to flooding, generally reflected in the pre-report average estimate of 54.3 mmt as compared to January's 57 mmt (itself unchanged from December). There's a good chance that Brazilian production could see a bearish surprise, possibly toward the high end of estimates at 105 mmt.
Corn production for both Brazil and Argentina could also be interesting, with Brazil's crop expected to increase slightly to 86.9 mmt from the previous 86.5 mmt. On the other hand, the average pre-report estimate for Argentina's crop came in at 35.7 mmt, down from January's WASDE projection of 36.5 mmt. If so, and if world demand remains near unchanged at 1.027 billion metric tons, then world ending stocks could see significant change as well.
WORLD ENDING STOCKS
Speaking of which, world corn ending stocks are expected to come down slightly with the average pre-report estimate at 220.6 mmt compared to the previous WASDE projection of 221 mmt. Generally, this is a result of the different production estimates of Brazil and Argentina implying world demand should be near unchanged from January's projected 1.027 billion metric tons.
World soybean ending stocks are expected to decrease by 1 mmt from January to 81.3 mmt. Again, if an attempt to link pre-report estimates logically, it would imply Brazil's crop is being underestimated ahead of the February reports. Otherwise, world ending soybean stocks would likely come in well below the average estimate, possibly challenging the 80 mmt level.
| U.S. ENDING STOCKS (billion bushels) 2016-2017 | ||||||
| Feb. | Avg | High | Low | Jan. | 2015-16 | |
| Corn | 2.342 | 2.415 | 2.250 | 2.355 | 1.737 | |
| Soybeans | 0.409 | 0.448 | 0.375 | 0.420 | 0.197 | |
| Sorghum | 0.038 | 0.043 | 0.036 | 0.038 | 0.037 | |
| Wheat | 1.178 | 1.211 | 1.145 | 1.186 | 0.976 | |
| WORLD ENDING STOCKS (million metric tons) 2016-2017 | ||||||
| Feb. | Avg | High | Low | Jan. | 2015-16 | |
| Corn | 220.6 | 225.1 | 218.0 | 221.0 | 210.0 | |
| Soybeans | 81.3 | 83.0 | 78.9 | 82.3 | 77.2 | |
| Wheat | 253.5 | 255.0 | 252.0 | 253.3 | 240.5 | |
| WORLD PRODUCTION (million metric tons) 2016-2017 | ||||||
| Feb. | Avg | High | Low | Jan. | 2015-16 | |
| Wheat | ||||||
| Australia | 33.0 | 24.5 | ||||
| Argentina | 15.0 | 11.3 | ||||
| Corn | ||||||
| Brazil | 86.9 | 91.5 | 82.2 | 86.5 | 67.0 | |
| Argentina | 35.7 | 37.0 | 34.0 | 36.5 | 29.0 | |
| Soybeans | ||||||
| Brazil | 104.1 | 105.0 | 103.0 | 104.0 | 96.5 | |
| Argentina | 54.3 | 57.0 | 52.0 | 57.0 | 56.8 | |
Darin Newsom can be reached at darin.newsom@dtn.com
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