Market reacts to dull WASDE report

Market reacts to dull WASDE report

Latest supply and demand numbers offer little support to grain markets.

AS expected, no real surprises were revealed in the U.S. Department of Agriculture's latest "World Agricultural Supply & Demand Estimates" (WASDE) report, which was released June 11.

Following the report, an initial negative reaction in the markets resulted from computer trading, but human trading somewhat stabilized the markets in the subsequent days.

The U.S. soybean supply and use projections for 2014-15 included a small reduction in beginning and ending stocks from the previous WASDE report. Lower beginning stocks reflected a higher crush projection for 2013-14.

The soybean crush for 2013-14 was raised 5 million bu. to 1.7 billion, reflecting an increase in projected soybean meal exports, which were set at 11.5 million tons, up 400,000 from last month based on stronger-than-expected shipments this spring.

Soybean ending stocks for 2013-14 were projected to be 125 million bu., down 5 million from last month, and ending stocks for 2014-15 were also reduced 5 million bu. to 325 million (Table 1).

While the trade expected USDA to report lower numbers for the old and new crops, the average trade estimate of 127 million bu. for old-crop soybeans came in slightly above the actual USDA estimate, while the average trade estimate for the new crop was 319 million bu., 6 million bu. lower than the USDA estimate.

The 2014-15 season-average price for soybeans was projected to be $9.75-11.75/bu., unchanged from last month. Soybean meal and soybean oil prices were projected at $355-395 per ton and 37-41 cents/lb., respectively.

Global ending stocks for old-crop and new-crop soybeans increased modestly in the June WASDE report. The average trade estimates for both crops implied that a decrease in the global numbers was expected, but USDA increased the old-crop world ending stocks from 66.98 million metric tons in May to 67.17 mmt in June. For the new crop, USDA increased the estimate only slightly, from 82.23 mmt in May to 82.88 mmt in June (Table 2).

For U.S. corn, USDA reported both old-crop and new-crop ending stocks as unchanged, at 1.146 billion bu. and 1.726 billion bu., respectively. The trade had expected an increase in old-crop ending stocks to 1.170 billion bu. but a decrease in new-crop ending stocks to 1.716 billion bu.

The WASDE report also projected corn production for 2014-15 to be unchanged, at a record 13.935 billion bu., with the projected corn yield remaining at 165.3 bu. per acre.

The projected range for the 2014-15 season-average farm price was unchanged at $3.85-4.55/bu. but was lower than the 2013-14 range of $4.45-4.65/bu. The 2013-14 price range was lowered 10 cents/bu. at the midpoint based on prices reported to date and the recent decline in nearby cash and futures prices.

 

Crop progress

According to the WASDE report, U.S. crop conditions in the most recent USDA "Crop Progress" report are the best in four years for the aggregated 18 reported states and better than at any time since 2007 for the Corn Belt.

For the week ending June 8, the latest report showed corn as 92% emerged. The corn rating did digress slightly, with 53% reported as "good," down 10% from the previous week, and only 10% rated as "excellent," down 3% from the prior week.

Acres planted to soybeans remained ahead of the five-year average during the week ended June 8, with 87% reportedly planted — a 9% increase from the previous week and 6% above the five-year average. The report revealed that 71% of soybean plants have emerged, an increase of 21% since the previous week. Last year at this time, only 69% of soybeans were planted and only 46% were emerged. USDA reported that 62% of soybean plants were in "good" condition, and 12% were deemed "excellent."

According to Purdue University extension soybean specialist Shaun Casteel, some soybean farmers might have to revise planting plans as they try to recover from erratic weather that has either delayed their plantings or forced them to replant.

Some Indiana soybean farmers still needed to plant soybeans as of the first week of June because of large amounts of rain, while others may have to replant, Casteel noted. He likened the spring warm-up and field dry-out conditions to a roller coaster.

"Just like any good roller coaster, the rise of temperatures peaked, so it could plummet downward while the intensity and frequency of rain skyrocketed," Casteel said. "All this occurred in our typically prime planting weeks."

He noted that although only a third of Indiana's soybean crop was planted by May 18, farmers caught up over the following two weeks by getting nearly half of the crop in the ground. As of June 1, they had planted 81% of the soybean crop, but Casteel pointed out that late plating has occurred in three of the past five years.

The need for planting adjustments is greatest for farmers in the central and northern parts of the state; farmers in the southern half generally have more time because of the longer growing season there.

Casteel said farmers still planting soybeans in June need to consider seeding rates, row width and the maturity group of seeds.

"We need to set the stage for the best possible return on late plantings," he said.

"If you are in a very late planting situation, I suggest back-dating 90 days from the typical fall freeze in your region to determine if you have enough growing season to mature a soybean crop," Casteel said. "My hope is that you will not need to make that determination."

 

Market recap

Last week, the USDA "Crop Progress" report and the June WASDE report gave the trade plenty to consider.

Another positive crop report provided an even brighter picture for 2014-15 crop production, and coupled with the abundant global supplies of grains and oilseeds reported in the WASDE report, both sent grain commodity prices lower.

Bryce Knorr, senior editor at Farm Futures, said big crops in South America have erased many concerns about tight stocks in the U.S. and added that the well-developing U.S. crop in the Midwest and forecast for good weather have also alleviated concerns.

Prior to the release of the June crop report, nearby soybean prices closed at $14.57/bu. last Monday and $14.625/bu. on Tuesday. By Wednesday, however, July contracts settled at $14.455/bu. and then plunged significantly on Thursday to close at $14.1525/bu.

According to Bob Burgdorfer, senior editor at Farm Futures, a mix of technical and fundamental selling a day after USDA raised its forecast for global soybean supplies was the reason for the lowest prices seen in two-and-a-half months.

Nearby corn futures prices settled at $4.455/bu. last Tuesday. Nearby corn prices were hardly affected by the WASDE report and actually corrected somewhat by Thursday after modest losses on Wednesday. July contracts did react to the WASDE report, closing at $4.41/bu., but bounced back to close at $4.44/bu. on Thursday.

Arlan Suderman, senior market analyst for Water Street Solutions, said corn is oversold, and that's what provided the correction in the market last Thursday.

 

Ingredient watch

Recent declines in corn futures contracts at the Chicago Board of Trade (CBOT) resulted in excellent pricing opportunities for end users of dried distillers grains with solubles (DDGS), according to the U.S. Grains Council (USGC).

According to USGC, domestic prices for DDGS have declined by $8-9/mt, and containerized prices to the export market declined $8-10/mt. Additionally, the group noted that there has been a substantial $7 decline from June to August in domestic rail-delivered rates to the West Coast.

"Buyers were dropping bids quickly, and one DDGS merchandiser had to reduce his rate by $8/mt in order to confirm sales," USGC said. "This strategy of stepping away from the market can work for DDGS buyers as long as corn futures contracts are in decline."

USGC also reported that exporters were recently rocked by reports that China may suspend the issuance of new import permits for U.S. DDGS and subject currently permitted imports to more stringent testing for the presence of unapproved biotech events.

While no official statement from China's government has been forthcoming, the resulting uncertainty has been roiling the trade in what is currently the largest U.S. DDGS export market.

"Such disruptions are costly to U.S. producers and exporters," USGC chairman Julius Schaaf said. "They are costly to end users in China and, ultimately, consumers in China as well. Unfortunately, this sort of thing has happened before, and it reinforces the need for continued engagement with China to work out solutions. It also reinforces the importance of a diversified global market for DDGS so that all our eggs aren't in one basket."

 

1. U.S. ending stocks, million bu.

 

USDA

Average

Trade

USDA

2013-14

June est.

est.

range

May est.

Corn

1,146

1,170

1,121-1,279

1,146

Soybeans

125

127

119-139

130

Wheat

593

590

565-625

583

2014-15

Corn

1,726

1,716

1,405-2,282

1,726

Soybeans

325

319

245-364

330

Wheat

574

552

475-658

540

 

2. World ending stocks, mmt

 

USDA

Average

Trade

USDA

2013-14

June est.

est.

range

May est.

Corn

169.05

168.35

167.50-169.12

168.42

Soybeans

67.17

66.43

65.00-67.50

66.98

Wheat

186.05

186.15

181.55-188.00

186.53

2014-15

Corn

182.61

159.41

149.90-175.00

181.73

Soybeans

82.88

80.34

67.00-95.00

82.23

Wheat

188.61

184.53

178.00-200.00

187.42

Sources for Tables: Reuters, USDA.

 

Volume:86 Issue:24

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