Corn, soy, wheat exports to increase

Corn, soy, wheat exports to increase

USDA adjusts U.S. corn balance sheet and South American production numbers; China cancels soybean order.

THE U.S. Department of Agriculture's monthly "World Agricultural Supply & Demand Estimates" (WASDE) report was released last week, and market participants were particularly eager to see four projections, including 2013-14 marketing year U.S. exports of corn and soybeans (Table 1) and the size of 2014 South American corn and soybean crops (Table 2).

"The interest in the export projections was generated by the rapid pace of export sales so far this year, particularly for soybeans," said University of Illinois agricultural economist Darrel Good. "Through the first 23 weeks of the marketing year, soybean exports had already reached 81% of the USDA's January projection of exports for the entire year."

Export commitments (shipments plus outstanding sales) as of Jan. 30 accounted for 106% of that January projection. With ending stocks already projected at a very tight 150 million bu., market participants were eager to see how USDA reconciled exports, ending stocks and price.

For corn, exports through the first 23 weeks of the marketing year had reached 42% of USDA's January projection. Export commitments as of Jan. 30, however, stood at 91% of that projection.

"While year-ending stocks of corn will be ample, an increase in the export projection was expected to result in the third consecutive month of a smaller projection for those stocks and provide support for old-crop corn prices," Good explained.

According to Good, interest in the South American production forecasts was generated by late-season weather issues that included excessive precipitation and flooding in parts of Argentina and excessive heat and dryness in parts of southern Brazil. Record-large soybean crops that would help alleviate the tightness in U.S. supplies during the last half of the 2013-14 marketing year are expected for both countries.

USDA increased its estimate of the size of Brazil's crop last month, and the projection for year-ending stocks was increased for both countries.

Smaller production estimates this month could result in lower projections of stocks for one or both countries. Corn production in both countries is expected to be smaller than last year, particularly in Brazil, but large enough to maintain an ample level of stocks. The projected size of Argentina's soybean crop was reduced last month, and the projection for ending stocks was reduced for both countries. Even smaller crops would point to a further drawdown in those stocks.

Good said for soybeans, USDA actually increased the projection for marketing-year U.S. exports by 15 million bu. to a total of 1.51 billion bu. That would be slightly larger than the record exports of 2010-11.

"The projection implies that at least 70 million bu. of outstanding export sales will be canceled or rolled into the 2014-15 marketing year," Good said. "Somewhat surprisingly, the projection of marketing year-ending stocks remained at 150 million bu. The projection of imports was increased by 5 million bu., and the projection of residual use was reduced by 10 million bu., which brings that projection more in line with the very small residual use of the previous two years."

USDA raised its soybean production forecast for Brazil by 37 million bu. and reduced Argentina's by 18.5 million bu. (Table 2). The projection for ending stocks was increased slightly for Argentina, based on expectations for smaller domestic consumption and exports and smaller stocks at the start of the year. The export projection for Brazil was increased by 37 million bu., and China's import projection was unchanged. The projection for global soybean ending stocks was increased slightly (Table 3).

"The 2013-14 marketing-year average farm price of soybeans is expected to be in a range of $11.95-13.45/bu., 20 cents higher than the January projection," Good said. "The unweighted average price received during the first four months of the marketing year was $12.88."

For corn, the projection for marketing-year U.S. exports was increased by 150 million bu. to 1.6 billion bu., and ending stocks were reduced by a similar amount. Good said to reach the projected level, exports will need to average 33.9 million bu. per week during the last 29 weeks of the year. To date, the average has been only 26.5 million per week.

USDA reduced its estimate of Argentina's corn crop by 39.5 million bu. but increased the ending stocks projection by 20 million bu. due to a larger estimate for beginning stocks and a smaller export projection.

The marketing-year average U.S. farm price of corn is projected to be in a range of $4.20-4.80/bu., 10 cents higher than the January projection. The unweighted average price received during the first four months of the marketing year was $4.69.

The U.S. Department of Energy recently reported an increase in ethanol production and an uptick in stocks. Arlan Suderman, senior market analyst for Water Street Solutions, said the numbers are the highest they've been since mid-July but still are well below year-ago levels.

Ethanol data suggest that the industry used 94.7 million bu. of corn last week, up from 94 million bu. in the previous week and up from 82.8 million bu. in the previous year. Ethanol production rose to 902,000 barrels per day for the week ending Feb. 7, up from 895,000 in the previous week and up from 789,000 in the previous year.

Ethanol stocks rose to 17.1 million barrels for the week ending Feb. 7, up from 16.7 million in the previous week but down from 19.5 million in the previous year.

For wheat, USDA raised its projection for U.S. marketing-year exports by 50 million bu. to 1.175 billion bu. To reach that level, exports will need to average 21.4 million bu. per week during the remaining 16 weeks of the year, slightly less than the average pace to date.

"Taken together, the new projections are negative for soybean prices, suggesting that the recent rally has stalled at the same level as the December rally," Good said. "In contrast, the new projections should provide modest support for old-crop corn prices and for wheat prices, suggesting that the recent advances will hold."

 

Market recap

Last week, USDA confirmed that China cancelled 10 million bu. of previously purchased old-crop soybeans and then ordered 8.8 million bu. of new-crop soybeans.

The soybean market did respond to the news, but Suderman said the U.S. had sold more soybeans than it could ship, so the cancellations were necessary. Additionally, he said the cancellations signal the upcoming end of the North American export season and the beginning of the South American season.

Nearby soybean prices on Feb. 7 settled at $13.315/bu., but after news of China's cancellations, nearby prices closed last Wednesday at $13.23/bu. A strong rally in the March soybean meal contract pushed soybean prices to a $13.4425 settlement last Thursday, breaking the previous $13.40 point of resistance.

Suderman said strong soybean meal shipments in the week ending Feb. 6, combined with strong soybean oil sales and shipments to support crush margins, were the main reason for the rally. Additionally, he said heavy rains were expected to slow down the flow of soybeans in South America.

According to Tom Leffler of Farm Futures, it was reported that three cargoes of U.S. soybeans were being held at port for testing for MIR 162 in the foreign matter. Leffler said it will be interesting to see how this develops and to watch how China will react to it.

March soybean meal futures scored a new contract high last Thursday for the third straight session. Good crush margins have been supporting soybean meal prices, and this has also carried over to hold soybean prices higher.

March corn futures remained above the 100-day moving average last week. Bryce Knorr, senior editor for Farm Futures, said while USDA's surprise cut to ending stocks helped generate some support after recent short-covering gains, the market appeared to need more fuel to make a decision to move. Corn prices were fairly uneventful last week, with nearby prices at or around $4.40/bu.

 

Ingredient watch

According to the U.S. Grains Council (USGC), futures markets have been moving higher and causing dried distillers grains plus solubles (DDGS) prices to increase $5-10 per metric ton. Additionally, recent winter storms moving across the U.S. have produced extremely cold temperatures and deep snow, which has driven up the cost of natural gas used to dry DDGS.

USGC said some domestic DDGS end users attempted to avoid the impact of higher natural gas prices by purchasing more wet distillers grains. While USGC said this strategy can work, to some degree, for domestic buyers, the increased weight of wet product means that it is only feasible to market it to local consumers within a limited distance radius.

 

1. U.S. 2013-14 ending stocks, billion bu.

 

USDA

Avg.

Trade

USDA

 

Feb. est.

est.

range

Jan. est.

Corn

1.481

1.619

1.574-1.748

1.631

Soybeans

0.150

0.143

0.125-0.164

0.150

Wheat

0.558

0.603

0.574-0.653

0.608

 

2. South America 2013-14 production, million mt

 

USDA

Avg.

Trade

USDA

 

Feb. est.

est.

range

Jan. est.

Brazil

Corn

70.00

69.99

66.10-74.00

70.00

Soybeans

90.00

89.76

88.30-91.00

89.00

Argentina

Corn

24.00

23.82

19.80-25.00

25.00

Soybeans

54.00

54.13

52.70-57.00

54.50

 

3. World 2013-14 ending stocks, million mt

 

USDA

Avg.

Trade

USDA

 

Feb. est.

est.

range

Jan. est.

Corn

157.30

159.6

156.27-163.20

160.23

Soybeans

73.00

72.67

71.00-75.35

72.33

Wheat

183.70

184.97

182.80-187.00

185.50

Source for Tables: U.S. Department of Agriculture.

 

Volume:86 Issue:07

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish