More bearish grain estimates expected

More bearish grain estimates expected

Markets struggle as strong crop ratings and favorable weather lend support to record crop yield predictions.

AFTER the U.S. Department of Agriculture's surprising June 30 "Grain Stocks" and "Acreage" reports revealed larger soybean stocks and acreage numbers than expected, the trade was really looking to the USDA July 11 "World Agricultural Supply & Demand Estimates" (WASDE) report to help better assess the domestic and global picture.

The average trade estimate for 2013-14 corn ending stocks was 1.232 billion bu., an increase from the USDA June estimate of 1.146 billion bu. (Table 1). The trade was expecting only a slight increase in 2013-14 soybean ending stocks, from 125 million bu. to 128 million bu.

The trade also expected that new-crop domestic ending stocks would increase. For 2014-15 corn stocks, the average trade prediction was 1.774 billion bu., up from USDA's June estimate of 1.726 billion bu.

The larger soybean acreage number revealed in the June 30 stocks report signaled the trade to expect an increase in the 2014-15 soybean ending stocks. The June WASDE report estimate for new-crop soybean stocks was 325 million bu., but the average trade estimate for July was at 418 million bu.

In terms of global supply, the average trade estimate for 2013-14 corn stocks came in at 169.48 million metric tons, a slight increase from USDA's June estimate of 169.05 mmt. The trade also expected new-crop corn stocks to increase from USDA's June number of 182.61 mmt to 184.53 mmt (Table 2).

For old-crop soybean stocks, the trade expected only a slight increase from the June WASDE report, from 67.17 mmt to 67.59 mmt. Similar to new-crop soybean stocks, the increase in U.S. acreage also contributed to an expected increase in global new-crop stocks, from 82.88 mmt in the June WASDE report to the trade's average prediction of 84.79 mmt.

As far as U.S. production goes, Jack Scoville, vice president of Price Futures Group, and Jerry Gidel, chief feed grain analyst for Rice Dairy, both said they expected USDA to leave 2014-15 yield estimates unchanged.

Scoville did suggest that USDA would possibly adjust the production numbers and said he expected USDA's domestic ending stocks figures to be fairly close to trade estimates.

According to Gidel, the favorable weather conditions that have allowed crop ratings to stay significantly in the good-to-excellent category have everyone pumped up about the 2014-15 harvest.


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






avg. est.


June est.























2. World ending stocks, million metric tons






avg. est.


June est.


























Sources for Tables: Reuters, USDA.


U.S. crop progress

USDA's weekly crop progress report for the week ending July 6 provided another set of strong numbers for soybean and corn plant growth. Favorable weather conditions have helped keep progress on track.

The report showed soybeans 98% emerged, ahead of both the five-year average and last year's progress. The percentage of soybeans blooming jumped 14% over the period, with 24% blooming — 15% higher than last year and 3% above the five-year average.

There had been concerns that the heavy rains in the Midwest would affect soybeans, but crop conditions remained unchanged from the prior week, with 72% in good to excellent condition.

Corn plant development also progressed during the week ending June 6, with a 10% increase to 15% of corn silking. While this number was 9% ahead of last year's progress, it was 3% behind the five-year average. For the most part, corn conditions remained close to unchanged, with 75% in good to excellent condition.


Brazil corn harvest

More bearish grain estimates expected
The U.S. Grains Council (USGC) reported that as Brazil's summer corn harvest draws to an end, total corn production in Brazil has exceeded initial expectations, causing prices to drop.

Production for the summer crop is nearly completed, at 32.2 mmt (1.3 billion bu.), with 100% of the crop harvested in the southern and central parts of the country (Figure). Total production estimates, including for both the summer and winter crops, are now at 75 mmt (3 billion bu.).

Despite ample production, export volumes for shipments from July through September are considerably lower than in previous years because of the higher initial price expectations, according to USGC.

"Because of the low sales volume at the beginning of the year, coupled with larger-than-expected production, Brazil will have a surplus of corn in the coming months," the group noted. "Whether this surplus can make it to market quickly will depend on government subsidies and logistics."

USGC said despite talk about new corn shipping ports in northern Brazil, little corn is being shipped from those areas.

"Ultimately, with strong corn production expected in the U.S. as well as in other exporting countries, import demand will be the factor that can change export volumes in Brazil for the rest of the year," USGC said.


Market recap

Corn and soybean prices both hit new lows last week as favorable weather allowed the crops to march toward the projected record yields expected this fall. Last Thursday brought some recovery in the markets from short covering ahead of the Friday release of USDA's WASDE report.

With ideal growing conditions and a favorable forecast for the future, traders were becoming more and more confident in their positions, which ultimately resulted in a very small amount of activity ahead of the Friday report.

"Traders are so bearish right now," said Arlen Suderman, senior market analyst for Water Street Solutions. "They are pretty confident now about how big these crops are going to be and how safe it is to carry short or sold positions into the report. So, we may not get much of a bounce before the report."

Soybeans tumbled last week after the holiday weekend, with July contracts plunging 24.75 cents last Monday to settle at $13.63/bu. Then, Tuesday brought another day of even bigger losses, with nearby prices closing at $13.2975/bu.

The market received a little strength last Wednesday as traders prepared for the USDA report, but by Thursday, nearby prices declined once again to settle at $13.2975/bu.

July corn futures hit contract lows throughout last week, and while they hovered just above the $4.00/bu. level for most of the week, they dipped to $3.9925 last Thursday as the release of the July WASDE report neared.

Nearby corn prices hit a four-year low last Monday to close at $4.0925/bu., but lower soybean prices and a good weather forecast sent corn prices even lower during the week. On Wednesday and Thursday, corn futures set contract lows in all months to close at $4.04/bu. and $4.005/bu., respectively.


Ingredient watch

The import situation in China continues to evolve for dried distillers grains with solubles (DDGS) as traders learn to navigate the changing regulatory environment, according to USGC.

Existing import permits are still valid, contracts are still being written and DDGS continues to arrive in China, where it is subject to inspection, the group said. Shipments that pass inspection may enter China.

Based on trade reports and recent discussions with government officials in China, USGC said approximately 200,000 mt of U.S. DDGS failed the new inspection regimen and are stranded in Chinese ports. The group has placed a high priority on finding new destinations for the rejected shipments and is working diligently on the ground in China to facilitate this process.

Current reports also indicate that new import permits will be issued to companies that have had no report of unapproved biotech traits in their shipments over the last year or those that have remedied any issues with cargoes that have been rejected within two months. These traders must also obtain certification that any new shipments will not contain any unapproved biotech traits, USGC added.

The DDGS issue in China has sparked the interest of bargain hunters in other countries. For example, USGC reported that Taiwan boosted imports of DDGS to 27,919 mt in June, about 13% of which were re-exported from China. Mexico, Europe, the Middle East and North Africa have also shown increased interest.

Volume:86 Issue:28

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