USDA Reports Preview

Confounded Demand

USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CDT Tuesday. (Logo courtesy of USDA)

Demand for U.S. grains continues to be one of the most confused statistics of 2016-17.

USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CDT Tuesday.

U.S. ENDING STOCKS

For the final time, 2016-17 domestic ending stocks will play a prominent role in USDA's monthly reports. Starting in May, as it always does, attention will turn to USDA's constantly changing predictions for the 2017-18 marketing year. But this doesn't mean USDA will finally adjust its thinking on old-crop ending stocks after months of seemingly ignoring extraordinary demand. No, USDA has in the past waited until attention is focused on new-crop before beginning its adjustments on old.

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And if it were to make a dramatic shift in April, which road would USDA go down? Based on corn's March 1 quarterly stocks number (released on Friday, March 31) of 3.768 billion bushels, and factoring in 10-year average second-half demand (as a percent of final total demand) corn ending stocks could be projected at 2.422 bb as opposed to USDA's March Supply and Demand estimate of 2.320 bb (increase of 102 million bushels). On the other hand, this past Thursday's weekly Export Sales and Shipment report showed total marketing year shipments through March 30 of 1.265 bb, a number that when divided by the three-year average percent shipped at this point of the marketing year, projects export demand of 2.635 bb, or 410 mb above USDA's March estimate. Subtracting that from USDA's current ending stocks figure results in a possible 1.910 bb of ending stocks. With both of these possibilities falling outside the listed pre-report range, it's increasingly likely USDA decides to stay on an unchanged path for now.

It's a different situation in soybeans, where March 1 quarterly stocks project an ending stocks figure of 466 mb as compared to USDA's latest estimate of 435 mb. Furthermore, total export shipments and the average three-year percent shipped results in a final export demand estimate of 2.002 bb, or 23 mb below USDA's March guess of 2.025 bb. Add this to USDA's existing ending stocks estimate, and a new projection would come in at 458 mb, in line with the quarterly stocks tally. Will USDA make the move now? As discussed above, most likely not, though a slight downward adjustment in demand could be seen.

Wheat's third quarter stocks number came in at 1.655 bb, and subtracting 10-year average demand by percent results in an ending stocks projection of 1.233 bb. This is 114 mb larger than USDA's March estimate and above the high side of the pre-report range of guesses at 1.2 bb. Export demand has been solid but running behind USDA's current expected pace. Shipments through March 30 would project total export demand at 934 mb, 91 mb less than USDA's March estimate and making up most of the difference implied by the March 31 quarterly Grain Stocks report.

WORLD ENDING STOCKS AND PRODUCTION

While some post-report attention will be paid to changes in world ending stocks estimates, the real adventure will be how USDA gets there. Most notably, how big is USDA willing to go when it comes to Brazilian soybean production? Leading up to the April report, it has been auction-like as private estimates climb higher almost every day. The latest from Brazilian research group Celeres was 113.8 million metric tons, as compared to USDA's March WASDE estimate of 108 mmt. As the table below shows, expectations are for USDA to increase cautiously to 110 mmt, with a high end estimate of 111.6 mmt. This leaves the door open for a possible bearish surprise if USDA decides to chase domestic (Brazilian) estimates.

It is unlikely USDA will make much of an adjustment to its Argentine corn and soybean production estimates with the latest weather threats occurring after or late in the process of putting the April WASDE together.

As for wheat, the world ending stocks number is expected to come in above 250 mmt, though the quiet debate will continue as to how much relevance the fact much of this abundance is stored in China holds.

U.S. ENDING STOCKS (billion bushels)
Apr. Avg. High Low Mar. 2015-16
Corn 2.345 2.484 2.270 2.320 1.737
Soybeans 0.447 0.471 0.425 0.435 0.197
Sorghum 0.039 0.041 0.037 0.038 0.037
Wheat 1.152 1.200 1.125 1.129 0.976
WORLD ENDING STOCKS (million metric tons)
Apr. Avg. High Low Mar. 2015-16
Corn 221.1 225.2 219.6 220.7 210.9
Soybeans 84.2 85.8 83.2 82.8 76.6
Wheat 250.6 253.0 249.0 249.9 240.3
WORLD PRODUCTION (Million Metric Tons) 2016-2017
Apr. Avg. High Low Mar. 2015-16
Corn
Brazil corn 92.5 94.0 91.0 91.5 67.0
Argentina corn 37.8 39.0 37.2 37.5 29.0
Soybeans
Brazil soybeans 110.0 111.6 109.0 108.0 96.5
Argentina soybeans 56.0 57.0 55.0 55.5 56.8
2016-17 2015-16
Wheat Apr. Mar. Apr. Mar.
European Union 144.66 160.00
Australia 35.00 24.17

Darin Newsom can be reached at darin.newsom@dtn.com

Follow Darin Newsom on Twitter @DarinNewsom

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