Soybeans stole the show in Tuesday's USDA report, with both domestic and global ending stocks for both 2015/16 and 2016/17 estimated below previous USDA estimates, as well as pre-report trade estimates.
The nearby July future rallied 57 1/2 cents on Tuesday while the November contract gained 51 3/4 cents; both facing modest set-backs on Wednesday with profit-taking.
DTN Analyst Todd Hultman refers to Tuesday's data as a being "less-bearish" for soybeans, rather than viewing it as a bullish outcome. The 305 million bushel United States ending stocks projected for the upcoming year of 2016/17, while well below pre-report trade estimates, would still be the second highest stocks seen in 10 years.
The attached chart indicates an even tighter situation for rapeseed/canola in the upcoming crop year, as seen in both Canadian data and from a global perspective. Tuesday's USDA Oilseeds: World Markets and Trade report pegs the 2016/17 global ending stocks at 3.427 million metric tons, which would be the lowest global carryout seen since 2003/04. This is down 30.7% or 1.5 mmt from the 2015/16 estimate and compares to the five-year average of 6 mmt (2012 to 2016).
The drop in global stocks is tied to a lower carry-in along with a projected 1 mmt drop in China's production, a 1.7 mmt drop in Canada's production and a 250,000 mt drop in European Union production.
As a percentage of annual global use, ending global stocks represent 5.1% of estimated global demand in 2016/17, the third consecutive drop and the lowest level seen in USDA tables which start at 2003/04, as indicated by the blue line on the attached chart and measured against the secondary vertical axis.
The red line on the chart represents Canada's stocks as a percentage of total demand, which is also projected to fall for the third consecutive year to a similar 5.2% in 2016/17, down from 18.6% in 2013/14. Note that this is based on AAFC's most recent April supply and demand tables, while the USDA has projected Canada's stocks to total demand ratio at an even tighter 4.5%, which would be approaching the 4.4% calculated in 2011/12 and the 4.2% reached in 2012/13, the tightest levels seen in Statistics Canada tables going back to 1996/97.
The grey bars on the chart represent the average annual futures price as calculated on the continuous chart using ProphetX, while the yellow bar represents the crop-year-to-date average for the current crop year, starting August 1. The last time that stocks/use ratios fell for three consecutive years was seen between 2009/10 and 2012/13, which resulted in Canada's ratio falling to levels just below current estimates for the upcoming crop year, while the average annual futures value as calculated on the continuous chart increased three consecutive years. The average future moved from $399.02/mt in 2009/10 to $548.70/mt in 2010/11, $569.96/mt in 2011/12 and hit a high of $610.99/mt in 2012/13/mt.
The yellow bar, or the 2015/16 year-to-date average, is calculated at $474.43/mt, only marginally higher than 2013/14 ($465.92/mt) and 2014/15 ($454.24).
This information could be viewed as supportive for the market, and points to a tight balance sheet which may not withstand much of a supply shock without a significant price escalation.
Cliff Jamieson can be reached at email@example.com
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