WASDE, planting reports vie for focus

WASDE, planting reports vie for focus

Crop planting progress surpasses year-ago levels as trade awaited May 9 WASDE report.

LAST week, the U.S. Department of Agriculture reported improving crop planting numbers in its May 5 "Crop Progress" report while also preparing to release its first estimates for the 2014-15 marketing year in the May 9 "World Agricultural Supply & Demand Estimates" (WASDE) report.

Although thunderstorms hit some regions, warmer weather and drier conditions finally offered farmers a much-needed opportunity to get some crops planted.

The "Crop Progress" report showed U.S. corn plantings to be 29% completed as of May 5, 10% more than the same date last year but still 13% behind the five-year average.

"We all know that given good planting weather, farmers can catch up quickly, but they have to be able to get into the fields," said Dr. Jim Hilker, an agricultural economist at Michigan State University.

Due to cool, wet conditions, Michigan is one of three states lagging behind significantly in planted corn acres, with only 3% in the ground as of May 5.

"As long as there are not significant problems in other parts of the world, once the market knows the corn has been planted in even a somewhat timely manner, the corn market could drop sharply," Hilker explained. "If corn plantings are significantly late, markets are not as likely to drop and are likely to be choppy all summer."

Hilker recommended that producers have a pricing plan in place.

As of May 5, soybean acres were 5% planted, 2% higher than last year but 6% behind the five-year average. Hilker said it will be a while before yield becomes a concern for soybeans, but there was a growing concern about corn planting occurring too late.

 

Pre-report estimates

Ahead of the May 9 WASDE report, the trade expected all 2013-14 estimates for ending stocks to decrease from the prior USDA report, except for 2013-14 U.S. wheat ending stocks and 2013-14 world soybean ending stocks (Tables 1 and 2).

The soybean supply continued to be an area of concern ahead of the WASDE report. The average trade estimate for U.S. soybean stocks decreased from the April WASDE projection of 135 million bu. to 134 million bu. due to increased exports and crush. On the other hand, traders estimated that global soybean stocks would increase from 69.42 billion bu. to 69.77 billion bu.

Bob Burgdorfer, senior editor for Farm Futures, said the publication expected U.S. soybean ending stocks to remain at 135 million bu., Argentina's soybean production to remain unchanged at 54 million metric tons and Brazil's crop production to possibly slip to 87 mmt from 87.50 mmt (Table 3).

The average trade estimate for U.S. old-crop corn ending stocks was 1.314 billion bu., a reduction from USDA's April estimate of 1.331 billion bu. The projection for 2014-15 world corn ending stocks was 159.41 billion bu.

On the soybean side, USDA was expected to report 307 million bu. for 2014-15 U.S. stocks and 80.34 billion bu. for world ending stocks.

Steve Georgy, broker manager with Allendale Inc., said his firm expected tighter ending stocks for corn, soybeans and wheat.

In preparation for the first round of new crop numbers, the trade was estimating that USDA would peg 2014-15 U.S. corn ending stocks at 1.672 billion bu., soybean stocks at 307 million bu. and wheat stocks at 553 million bu.

For 2014-15 global stocks, the trade projected 159.41 billion bu. for corn, 80.34 billion bu. for soybeans and 184.53 billion bu. for wheat.

Arlan Suderman, senior market analyst for Water Street Solutions, said he expected USDA to report a big increase in the 2014-15 new-crop soybean stocks balance sheet.

He said while USDA is notorious for doing that, the agency's track record clearly leans toward overestimating stocks in its initial report by underestimating demand. In fact, Suderman said USDA has done this in 15 of the past 18 years.

"Even so, the trade tends to believe USDA's May outlook, giving a bearish slant to the market coming out of the report," he added.

Traders expected only modest changes for South American production numbers ahead of the WASDE report. Projections for Argentina's corn production were decreased from the USDA April estimate of 24.00 mmt to 23.86 mmt, while Brazil's corn production was increased from 72.00 mmt to 72.10 mmt.

Soybean production estimates for Argentina were increased from 54.00 mmt to 54.40 mmt, while the trade expected Brazil's soybean numbers to decrease from 87.50 mmt to 87.23 mmt.

 

Market recap

Traders were using rallies to try to take some profits last week in order to not leave themselves totally exposed for the USDA report, according to Suderman.

Corn prices trended mostly higher last week due to expectations that the WASDE report would decrease stocks estimates. May contracts closed at $5.0325 last Monday, but by Thursday, traders were waiting to see what the WASDE report revealed. Nearby corn prices closed the highest for the week at $5.1325/bu. on Thursday.

Soybean futures extended their downtrend to a third straight session on Wednesday amid worries about imports and slowing demand from top buyer China, according to Burgdorfer.

News of a record canola crop in Canada also affected nearby soybean prices at the beginning of the week, but prices rallied on Thursday following a report from Reuters that China's April soybean purchases were the largest yet for this year and were up 63.5% from last year.

While nearby soybean prices closed at $14.72/bu. last Monday, prices dipped lower on Tuesday and Wednesday to $14.64/bu. and $14.51/bu., respectively. According to Burgdorfer, however, the Reuters report and traders balancing their accounts ahead of Friday's report resulted in significant gains on Thursday, with May contracts closing at $14.7425/bu.

 

Ingredient watch

The U.S. Grains Council reported that dried distillers grains (DDGs) sales to foreign locations were somewhat spotty as the world celebrated May Day on May 1. Merchandisers reported that prices were rather erratic in the spot market because many foreign DDG buyers were temporarily out of the market.

However, the council said buyers in Vietnam did step into the market and made some purchases for the June and July period.

Merchandisers recently reported that they were starting to see some price weakness in U.S. domestic markets as more cattle were put on pasture and because of the porcine epidemic diarrhea virus-reduced swine herd.

According to the Renewable Fuels Assn. (RFA), March DDG exports set a new monthly record of 1.16 mmt, up 28% from February and topping the 1 mmt mark for just the fourth time in history.

China accounted for half (580,494 mt) of the DDG export shipments, while Mexico (106,064 mt) and South Korea (93,814 mt) were other leading destinations.

Year-to-date DDG exports stood at 2.97 mmt, a 65% increase over the same period a year ago. RFA said U.S. producers are on pace to export a record 11.9 mmt in 2014.

It was a mixed market last week in the meat, fish and bone meal sector, according to one veteran protein trader, who explained, "Certain pockets on meat and bone meal seemed pretty firm, while other parts, like the eastern U.S., gave away about $10 per ton."

The trader said many are expecting the market to go lower because "nobody wants to buy. Railcars will take two to three weeks to get somewhere, so buyers are more interested in spot trucks."

In the feather meal market, the trader said activity on the international front has been much better than he has seen in a long time. Because of this, the source said the domestic market has had to reduce prices $10-20 per ton to be competitive.

Demand for pet food-grade poultry byproduct meal has decreased, but inventories haven't been affected yet, according to the trader.

 

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

 

Avg.

Trade

USDA

2013-14

est.

range

April est.

Corn

1.314

1.231-1.435

1.331

Soybeans

0.134

0.125-0.174

0.135

Wheat

0.588

0.570-0.633

0.583

2014-15

Corn

1.672

1.295-2.354

N/A

Soybeans

0.307

0.200-0.464

N/A

Wheat

0.553

0.425-0.652

N/A

 

2. World ending stocks, billion bu.

 

Avg.

Trade

USDA

2013-14

est.

range

April est.

Corn

157.31

149.45-161.20

158.00

Soybeans

69.77

67.30-73.00

69.42

Wheat

185.95

181.91-189.00

186.68

2014-15

Corn

159.41

149.90-175.00

N/A

Soybeans

80.34

67.00-95.00

N/A

Wheat

184.53

178.00-200.00

N/A

 

3. South American crop production, 2013-14, mmt

 

Avg.

Trade

USDA

Argentina

est.

Range

April est.

Corn

23.86

22.30-25.00

24.00

Soybeans

54.40

53.50-57.00

54.00

Brazil

Corn

72.10

70.50-74.00

72.00

Soybeans

87.23

86.50-87.50

87.50

Sources for Tables: Reuters, USDA.

 

Volume:86 Issue:19

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