USDA Reports Preview
By Darin Newsom
DTN Senior Analyst
OMAHA (DTN) — The most-watched numbers in the December round of USDA reports are expected to be world production and ending stocks estimates.
USDA will release its Crop Production and monthly World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CST Tuesday.
Pre-report estimates for the domestic corn situation are at once interesting and amusing. According to news accounts, the average ending stocks guess came in at 1.861 billion bushels as compared to USDA’s November projection of 1.887 bb. Where are the adjustments expected to be made to create the decrease? Nobody really seems to know. Truth be told, the high side of the pre-report range of 2.013 bb is likely closer to what the fundamental situation could be if demand is overestimated as widely believed.
On the world stage, global ending stocks are expected to fall slightly from the November estimate of 164.3 million metric tons. Pre-report prognostications averaged 163.9 mmt, and like the domestic situation, are accompanied by no explanation as to why. Could global demand be on the upswing? Possibly, though there doesn’t seem to be many confirming market indicators at this time.
How big will big be? That is the question those interested in soybeans will be tracking when global production numbers are released. Heading into the WASDE report, talk of Brazil raising a 90 mmt crop has been growing in volume. And like a coffee shop roundtable, the Argentine crop is boasted to be approaching 55 mmt. All of this is expected to result in global ending stocks of 71.1 mmt, up from the November estimate of 70.2, though again, the high side guess of 72.9 may seem more realistic.
Domestically, ending stocks are supposed to fall 16 mb from USDA’s November projection of 170 mb to the average pre-report estimate of 154 mb. If this happens, it will be interesting to see how it is achieved. Since August, USDA has refused to acknowledge its own export total for 2012-2013 of 1.33 bb. But, since it unexpectedly (and quietly) upped 2012 production in its November report by a convenient 19 mb, the government may now feel like it can increase export demand to what actually occurred. Taking another 10 mb off 2012-2013 ending stocks would decrease 2013-2014 beginning stocks by a like amount, resulting in the projected decrease in ending stocks. Stay tuned for more fun and frivolity in soybeans.
The recent release of the latest Stats Can report could steal the thunder from WASDE. The Canadian government estimated the wheat crop at 37.5 mmt, as compared to the November WASDE estimate of 33.2 mmt. A look at the average pre-report figure of 178.8 mmt for global ending stocks would seem to reflect the idea that world production, not just in Canada, is likely to see strong increases. The November ending stock number came in at 178.5 mmt.
Domestically, the average pre-report guess of 553 mb is somewhat of a head-scratcher. Like corn and soybeans, this is a decrease from what was seen in November, making one wonder if USDA really knew what it was doing shortly after firing up again following the government shutdown.
WHAT THE MARKET THINKS
Soybeans: The more interesting divergence between the market’s view of real fundamentals and UDSA’s sometimes fantasy land is in soybeans. USDA is expected to be extremely bearish with its global numbers, yet the forward curve for soybeans (series of futures spreads) remains inverted, reflecting a long-term bullish market outlook toward supply and demand. Who will be right and who will be wrong? If history is any indicator, the market usually wins.
Corn: Corn spreads are also interesting heading into the reports. While average estimates show an expected decrease in both domestic and global ending stocks, the carry in corn’s forward curve continues to indicate a neutral-to-bearish long-term market view of fundamentals. While it may not be a surprise to see USDA make some cuts, the market isn’t indicating the degree of the decrease will be as large as expected.
Wheat: Because of variable storage rates, wheat spreads remain a difficult read. Yet the strong carry seen, particularly in Chicago but also Kansas City and Minneapolis, would suggest the idea of larger world ending stocks is possible. Given the depth charge sent by Stats Can, it will be interesting to see how the Minneapolis spring wheat market reacts following the release of the WASDE report.
|U.S. ENDING STOCKS (million bushels) 2013-2014|
|WORLD ENDING STOCKS (million metric tons)|
|WORLD PRODUCTION (million metric tons)|
Darin Newsom can be reached at email@example.com
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