March 11, 2004

 

 

USDA Figures Bullish For Soy Over Long Term

 

According to Chicago Board of Trade analysts, the latest U.S. Department of Agriculture estimates suggest higher prices over the long term.

 

"There is nothing bearish from these numbers. There will be significant increases in volatility, but the easiest way for the prices to move is up," said grain analyst Jack Scoville, president of JSL San Jose and JSL Sa de CV, San Salvador.

 

The USDA in its March supply/demand reports issued on Wednesday morning forecast world soybean end-season stocks at 35.88 million tonnes, down from the forecast in February for 37.47 million.

 

Analysts said that number was bullish for CBOT soybean futures, despite preopening calls of 5-10 cents lower.

 

Pit traders were disappointed with USDA's forecast for Brazilian soy output this year at 59.5 million tonnes. That was below last month's 61.0 million, but recent local forecasts out of Brazil have fallen to 55 million or lower due to weather and disease damage.

 

"The soy world might be disappointed they didn't go down to at least 57 or 58 million, but the world stocks cut to 35.88 million is friendly," said Joe Victor, vice-president/marketing for advisory and consulting firm Allendale Inc.

 

USDA also left unchanged its forecast for 2003/04 U.S. soy ending stocks at 125.0 million bushels, a 27-year low. But most analysts had expected a further cut to 121 million bushels -- about a three weeks supply.

 

"Demand is being rationed now with bean exports (U.S.) declining the past couple of weeks and the demand is shifting to South America," Scoville said of the unchanged end-stocks.

 

USDA forecast world corn end-season stocks at 67.79 million tonnes, slightly above its forecast in February for 67.23 million. U.S. corn end-season stocks were also kept unchanged at 901 million bushels, but analysts were not discouraged.

 

"We're definitely looking at the corn ending stocks as friendly. You have to go back to 1995-96 to find a stocks-to-usage ratio as low as that," Victor said.

 

"Corn is acting just great and the demand will be improving as we move ahead," Scoville added.

 

The wheat market also found some supportive long-term news in USDA's March supply/demand data.

 

USDA cut projected world 2003/04 wheat ending stocks to 124.93 million tonnes, below the forecast in February for 125.95 million and the lowest in 22 years.

 

World wheat production in 2003/04 was also downsized by another 3 million tonnes to 548.06 million.

 

But Scoville cautioned, "There are increasing signs of improved production among major wheat exporters next year, so that will keep wheat prices in check."