USDA Report Holds Surprises

January 13th, 2012

By:

Category: Commentary, Grains, Oilseeds, Sugar

(Stephen S. Nicholson) - USDA’s January reports hold surprises, including higher production, stocks and winter acreage.

We expect this morning’s USDA report to have more of a psychological than fundamental impact on the market.  This morning’s numbers were above pre-report expectations, but the actual impact to the balance sheets was minimal at best.  It is likely that the residual effects of today’s report will be short-lived as the market’s attention will turn quickly to the continued drought in South American and its affect on soybean and grain output.

Grains’ & Soybeans’ Stockpiles Increase

Production (bln bu.)

 

January

Avg. Trade Estimate

 

November

Corn
   Production

12.358

12.280

12.310

   Yield (bu/acre)

147.2

146.4

146.7

Soybeans
   Production

3.056

3.042

3.046

   Yield (bu/acre)

41.5

41.3

41.3

 

December 1 Stocks (bln bu.)

Dec. 1. 2011

Avg. Trade Estimate

Dec. 1, 2010

 
Corn

9.642

9.401

10.057

Soybeans

2.366

2.312

2.278

Wheat

1.656

1.679

1.933

 

2011/12 Ending Stocks (mln bu.)

 

Jan.

Avg. Trade Estimate

 

Dec.

 
Corn

846

753

848

Soybeans

275

227

230

Wheat

870

831

878

 

Vegetable Oil

CBOT soybean oil futures opened 100-110 pts. lower and is currently trading 60-75 pts. lower.

  • Third consecutive day of volatile trading as the market digests today’s USDA reports.
  • Here are balance sheet highlights:
    • 2011/12 U.S. soybean crush and export was lowered 10 mln bu. and 25 mln bu., respectively.
    • On the U.S. soybean oil balance sheet, USDA lower production 165 mln lbs. and lowered exports 200 mln lbs. to a surprisingly low 1.2 bln lbs.
    • USDA left soybean oil use for methyl ester production unchanged at 3.6 bln lbs.
    • Consequently, 2011/12 soybean oil ending stocks increased 25 mln lbs. to 2.315 bln lbs.
    • South American weather will continue to be on the front burner—there is no rain in the forecast into the week of the Jan. 23rd, but temperature will be moderate in the 80s.

Price Outlook:  Soybean oil futures broadened out the trading range today, but have climbed back into the $0.51-$0.54 range.

Wheat

Wheat opened $0.20-$0.30 per bu. lower and is currently trading $0.30-$0.40 per bu. lower.

Winter Wheat Seedings (mln acres.)

 

January

Avg. Trade Estimate

 

Last Year

 
All Winter Wheat

41.9

41.0

41.6

   HRW

30.1

29.6

28.5

   SRW

8.4

7.7

8.6

   White Winter

3.5

3.7

3.6

  • Highlights from USDA reports:
    • The big surprise was the higher than expected winter wheat acreage.
    • The major change in the balance sheet was the 25 mln bu. increase in exports to 950 mln bu.
    • The result was a minor downward adjustment in ending stocks to 870 mln bu., down 8 mln bu.
    • Weekly U.S. wheat export sales were 438,200 MT, above expectations.
    • NOAA issued its monthly La Nina update late last week—they are expecting La Nina to continue into the March-May time period which means more dry weather for HRW wheat growing areas.

Price Outlook: Today’s market action has done significant chart damage with the greater acreage figures; wheat futures are going to be on the defensive.

Sugar

#11 Sugar futures opened 10-20 pts. Higher and are currently trading 10-20 pts. lower.

  • #11 sugar futures are chopping around today.
  • EU granted licenses to export 650,000 MT of sugar; EU is looking to get rid of export sugar.
  • USDA threw a curve at the domestic market today.
    • USDA lowered 2011/12 cane production 15,000 STRV to 3.345 mln STRV.
    • Significant cuts were made to imports, lowering both TRQ and Mexican sugar imports.
    • In the end, 2011/12 ending stocks were nearly cut in half to 620,000 STRV, which resulted in the stock-to-use ratio declining to a record low 5.3% from 10.3 last month.
    • American Crystal Sugar continues to operate with replacement workers as labor negotiations have resulted in a lockout.
    • However, with the market well sold, it is difficult to envision prices dropping off significantly in the foreseeable future.

 Price Outlook: Today’s USDA numbers are going to be supportive to prices and any recent “discounting” will be coming to a quick end.

Add New Comment

Forgot password? or Register

You are commenting as a guest.