June WASDE: Are new crop beans already being rationed?

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USDA’s World Agricultural Supply and Demand Estimate (WASDE) report did little to feed the corn bulls this morning, but the soybean bulls were provided with a feast, particularly on the new crop.  And for the first USDA grain-related report ever released during commodity trading, the CME pits were awash with volatility when the numbers were released after trading had been underway for 10 minutes.

Basically, the USDA June Supply-Demand report for new crop corn was a yawner, without a single number being changed from May to June.  No change in production as some had anticipated based on Midwestern dryness.  No change in consumption.  No change in carryout, or in the expected season average price of $4.20 to $5.00.  The carryout a year from this August 31 is forecast at 1.881 bil. bu.

And the USDA kept that same feeling for old crop corn, with less than 3 months left in the marketing year.  There was no change in ending stocks at 851 mil. bu.  However, the USDA projected 50 mil. fewer bushels will be exported and 50 mil. more will be used for ethanol production.  USDA said ethanol production has increased since mid-April, and international sales were falling off, “Tight domestic supplies and increased competition, especially from Brazil, are also expected to reduce U.S. export prospects during the summer months.”  USDA said the second crop corn in Brazil had nearly ideal weather and production would increase.  Globally, corn production is up, thanks to more in China, the EU and the Former Soviet Union.  Global ending stocks will be 3.4 million tons more than last forecast, with nearly all of that from China and Brazil.

For soybeans, the USDA reduced old crop soybean stocks to 175 from the 210 million forecast last month, but pushed the August 2013 carryout for the new crop down to 140 million, which would be a 4.3% stocks to use ratio.  That would be the least number of soybeans on hand since the mid-60’s.  Some would begin to hint that the new crop, barely planted and up, may have to be rationed. 

USDA raised old crop soybean exports by 20 mil. bu. to 1.335 bil. reflecting increased global demand.  Most of the demand is from China, were soybean production is down a half million tons because of production switches to corn.  By dropping the carry-out this year, USDA pushed down the carry-in for next year.  Due to the expected shortfall, USDA has reduced the crush forecast for next year by 10 mil. bu. and the export forecast by the same.  Total production is expected at 3.205 bil. bu. and total use at 3.255 bil.  However, the USDA did not change the expected season average price from the $12- $14 range set in May.

USDA reported a winter wheat production forecast at 1.68 bil. bu. down 1% from May.  The average yield is projected at 47.3 bushels per acre, down 0.3 bu. from May’s prediction.  On the wheat balance sheet, old crop ending stocks have dropped from 768 mil. in May to 728 mil. in June.  For the new crop, ending stocks have dropped from 735 mil. in May to 694 in June.

Due to the changes in trading hours on the commodity exchanges in the past month, this report from USDA was the first grain-related report to be released while the exchanges were trading.  The CME Group’s Globex began its trading day at 5 p.m. yesterday and is underway through 2 p.m. today.  Since the 7:30 a.m. Central time release of the USDA report would have been during the Globex session, the CME pushed ahead the opening of the open outcry session from 9:30 to 7:20 a.m.  So with both trading systems underway, corn and beans both traded within a 20-cent range in the first several minutes, and wheat traded within a 14 cent range within several minutes after the release of the report.

Summary:
USDA’s June Supply-Demand report was the first one ever released during the trading session of the CME’s Board of Trade, with expected volatility for corn and soybean prices.  The balance sheet for new crop corn was left unchanged from May, and for old crop corn, only some minor adjustments were made in use, but none in the carryout.  For soybeans the old crop is being consumed at a higher rate internationally, so USDA increased the export projection, and reduced the carryout at the end of August.  But that reduced the supply available in the new crop marketing year, and the carryout in August of 2013 is already showing tendencies toward rationing.

Source: FarmGate blog


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