USDA estimates hold steady

USDA estimates hold steady

- Monthly corn and soybean ending stocks steady. - Trade disappointed USDA did not trim Argentine production further. - Markets now lo

THE U.S. Department of Agriculture's March "World Agricultural Supply & Demand Estimates" (WASDE), by and large, gave the trade status quo in terms of market-moving news.

Holding domestic ending stocks steady with its February estimate, USDA likewise maintained its estimates for Brazil's production.

South America, after all, was the big focus of this month's USDA projections. Analysts were waiting to see if USDA saw sufficient evidence from the Southern Hemisphere to materially alter its guesses of production in Argentina and Brazil.

While USDA did lower its estimates for Argentina's production slightly, traders were expecting more dramatic cuts for both corn and soybean output based on frequent reports of considerable weather woes. USDA exceeded the average trade guess in both cases by nearly 1 million metric tons (Table 1).

Also somewhat surprising to the trade was USDA's decision to stand pat with the estimate for Brazil's soybean crop. The USDA attache in Brazil had recently lowered its estimate of the crop's size, leading some to speculate that the official figure would likewise turn lower -- but it did not.

Looking at domestic ending stocks, the trade had anticipated a slightly larger corn carryout and a slightly smaller soybean figure (Table 2). USDA appears to be waiting for the quarterly "Grain Stocks" report, due for release March 28, before making any further adjustments to the corn and soybean balance sheets.

On the other hand, USDA did change its estimate of wheat ending stocks, exceeding the average trade guess by 12 million bu. In raising its estimate by more than 3.6% from the February projection, USDA reminded the market that while wheat exports have picked up in recent weeks, they're still fairly disappointing for the marketing year as a whole.

In fact, USDA lowered its estimate of wheat exports by 25 million bu. in the March estimate, accounting for 100% of the increased ending stocks.

Citing strong competition from the European Union and former Soviet Union countries, the report notes that exports were off for both hard red spring and winter wheat varieties, as well as for white wheat, although exports were projected to be slightly larger for soft red winter wheat.

Digging into the corn ending stocks, USDA increased imports, decreased exports and raised its estimate of feed and residual use based on continued expansion in poultry production.

For the overall global ending stocks situation, USDA tightened its estimate of global corn stocks while increasing its estimates for soybean stocks (albeit just slightly) and wheat stocks (Table 3). As with the U.S., global corn export figures were trimmed, as were production numbers for Argentina and South Africa; feed use was also projected to be higher for the U.S., India and Malaysia.

The largest increase in global ending stocks was for wheat, thanks to expectations for larger production in India -- 1.0 mmt -- and slightly larger production in Lithuania. USDA raised wheat exports for the EU, Brazil and the Ukraine.

Of interest, wheat feeding was projected to be 1.3 mmt larger, and food use was projected to be slightly smaller.

USDA may have surprised the trade most by holding soybean ending stocks steady with the February estimate. Exports have exceeded last year's pace, but the department said exports should decline in the months ahead as South American soybeans finally make it to market.

Likewise, the soybean crush has run far afield of last year but was projected to slacken in the second half of the marketing year as soybean meal exports dwindle on increased global supplies.

 

Market recap

In the hour following last Friday's WASDE report release, old-crop corn traded higher, while new-crop contracts trended slightly lower.

Soybeans, on the other hand, traded more than a dime lower for contracts from May onward.

Wheat contracts were also lower, although to a lesser magnitude. Wheat had traded lower, in fact, for much of the week heading into the report. Exports have turned higher in recent weeks as prices tempt overseas buyers back into the U.S. market, with wheat prices actually lower than corn in many cases.

Because of this unusual occurrence, discussions of wheat feeding arose again in earnest, and POET, the country's second-largest ethanol producer, said it was bidding to buy soft red winter wheat for at least one of its biorefineries.

In USDA's weekly export inspections report released early last week, corn and soybean shipments came in toward the high end of traders' expectations, but wheat was on the lower end. China was back in the market for U.S. soybeans, putting in a 345,000 mt order for the 2013-14 marketing year; a 330,000 mt order for the current marketing year was tabbed for "unknown destinations."

The market watched weather developments closely, with winter storm systems in recent weeks providing some much-needed moisture to the middle section of the country (Map).

Wheat crop conditions -- which headed into winter as some of the poorest on record -- were expected to benefit, and farmers were pleased to "recharge" some soil moisture from the frequent snowfall in many regions.

Ethanol production figures were disappointing last week. The Energy Information Administration reported that production had fallen 7,000 barrels per day from the previous week. Production averaged 805,000 barrels per day, better than many weeks this year, but the downturn signaled an end to a multi-week increase in the pace of refining.

Gasoline prices at the pump appear to be limiting consumers' driving habits, as gasoline demand for the week also turned lower, down nearly 10 million gal. per day from the prior week.

 

Ingredient watch

Soybean meal continues to be the main trendsetter for most protein meals. "It's our only competition," one animal protein merchandiser told Feedstuffs.

Meat and bone meal markets are starting to "feel toppy," the source reported, suggesting that some pushback from customers is keeping a lid on prices that have firmed fairly well over the past month.

Feather and poultry meal prices remained firm, and although pet food-grade markets could be topping out, feed-grade products are expected to maintain their strength as customers in the poultry sector continue to expand production.

"We may be pushing the envelope a little, so we're going to have to be careful not to get too greedy," one marketer noted.

Traders and marketers are also watching the EU, which recently approved legislation that would allow fish farmers to use animal proteins in feed starting in June. However, some ethnic groups were not pleased with the measure.

Media reports from Egypt last week indicated that Muslims living in the EU were awaiting a fatwa -- a religious edict -- on their ability to consume fish that had been fed pork-based proteins. Islam bans its adherents from consuming pork products, and believers called for guidance from spiritual leaders on how that prohibition extends to animals fed pork-based ingredients.

While the situation may be a little unusual for feed marketers, it nonetheless caught the attention of protein exporters last week.

 

1. South American 2013 production, mmt

 

USDA

Avg.

Trade

USDA

March est.

est.

range

Feb. est.

Argentina

Corn

26.5

25.5

24.0-26.5

27.0

Soybeans

51.5

50.9

48.5-52.0

53.0

Brazil

Corn

72.5

72.3

68.0-75.8

72.5

Soybeans

83.5

83.1

81.0-84.5

83.5

 

2. U.S. 2012-13 ending stocks, million bu.

 

USDA

Avg.

Trade

USDA

March est.

est.

range

Feb. est.

Corn

632

643

560-695

632

Soybeans

125

120

100-130

125

Wheat

716

704

670-754

691

 

3. Global 2012-13 ending stocks, mmt

 

USDA

Avg.

Trade

USDA

March est.

est.

range

Feb. est.

Corn

117.0

117.8

116.0-120.0

118.0

Soybeans

60.2

59.4

58.0-60.6

60.1

Wheat

178.2

176.5

174.5-178.0

176.7

Sources for Tables: Reuters, USDA.

USDA estimates hold steady

Volume:85 Issue:10

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