USDA loosens U.S. sugar balance sheet, but supply still tight

February 9th, 2012


Category: Commentary, Grains, Oilseeds, Sugar

While this morning’s USDA report held no real news on soybean, and only a slight modification on wheat, some big changes on the sugar balance sheet indicate a tightening of U.S. sugar supplies in the 3rd quarter.

Macro-Economic News

  • Greek leaders finally signed an agreement regarding the austerity measures needed to secure the next round of bailout money, which is needed to avoid a messy default.
  • U.S. dollar index is lower again today.

Vegetable Oil

CBOT soybean oil futures opened unchanged and is currently trading 15-25 pts. higher.

  • USDA released its latest supply/demand projections this morning.
    • There were no changes made to the U.S. soybean, soybean meal and soybean oil balance sheets.
    • As expected, USDA did decrease both Argentine and Brazil soybean production to 48 MMT (-2.5 MMT) and 72 MMT (-2.0 MMT), respectively.
    • Rainfall continued across northwest Argentina, but southern Brazil remained dry.
      • There are some chances for scattered light rain in southern Brazil today and over the weekend, but then it turns dry.
      • Malaysian Palm Oil Board will release January data tomorrow morning.
      • Weekly exports sales were generally in line with expectations.
      • The Malaysian government has increased the volume of Malaysian crude palm oil that can be exported duty free to 3.6 MMT from 3.0 MMT last year.  This move is to combat Indonesia’s low export tax.

Price Outlook:  March soybean oil futures have broken out above $0.52, next upside target is $0.5350-$0.54 area.



Wheat opened $0.03-$0.05 per bu. lower and is currently trading $0.05-$0.10 per bu. lower in Chicago and Kansas City, while Minneapolis’ trading is mixed.

  • USDA made one change to U.S. wheat balance sheet.
    • The only revision was a 25 mln bu. increase in 2011/12 exports to 975 mln bu.
    • As a result, ending stocks declined 25 mln bu. to 845 mln bu., which is slightly supportive to the market since the trade was expecting no changes.
    • Weekly U.S. wheat export sales were 707,900 MMT, which was above expectations.
    • Dryness in the northern U.S. Plains is limiting potential spring wheat production, which is supportive to Minneapolis wheat futures.
    • Bitter cold temperatures in Europe continue to affect winter wheat crop prospects in Europe with the potential for one-third of Ukraine’s wheat crop being impacted.

Price Outlook: March Kansas City wheat futures continues to trade in a narrow range between $6.60-$7.20–$7.20 remains stiff overhead resistance.


#11 sugar futures opened unchanged, futures are currently trading 35-45 pts. higher.

  • USDA made several changes to the U.S. sugar balance sheet.
    • Projected 2011/12 cane sugar production was increased 30,000 STRV to 3.475 mln STRV
    • Total imports were decreased 44,000 STRV, even though the TRQ was increased, Mexican imports are projected to decrease 219,000 STRV.
    • On the demand side, food deliveries were decreased 250,000 STRV to 10.975 mln STRV, thereby total demand declined to 11.445 mln STRV from 11.615 mln STRV.
    • In the end, ending stocks rose to 876,000 STRVW from 620,000 last month and the stocks-to-use ratio improved to 7.7% from 5.3% in January.
    • #11 sugar futures are moving higher today, heavily influenced by changes in the currency values.
    • An Indian government source has said that India will allow unrestricted exports of 1.0 MMT of sugar.
    • China announced that it will stockpile 1.0 MMT of white sugar to stabilize domestic prices.
    • The drought in Mexico is getting more headlines—reports from Mexico indicate the sugar crop has suffered damage.
    • American Crystal Sugar continues to operate with replacement workers.
    • U.S. supplies of the sugar are going to get extremely tight by Q3.

Price Outlook: U.S. sugar balance sheet is supportive to prices; we are looking for domestic prices to firm.

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