May 13, 2004

CBOT Traders Call USDA Supportive For Soybeans, Wheat, Corn

Traders digesting fresh data from the U.S. Department of Agriculture early Wednesday call the figures supportive for soybean, wheat and corn futures.
 
With the 2004 winter wheat production estimates in line with pre-trade estimates, most traders quickly focused in on 2004-05 carryout forecasts.
 
CBOT soybean traders said that U.S. 2004-05 soybean stocks of 190 million bushels were supportive. The average pre-trade estimate had come in at 212 million. World 2003-04 soybean stocks were also trimmed slightly.
 
Even though world 2003-04 corn stocks were increased through a revision to China, many traders contended that such a jump had been expected and already factored into the market. U.S. corn 2003-04 ending stocks were cut by 50 million bushels and even with an optimistic 2004-05 U.S. corn crop ending stocks were forecast to decline again.
 
Traders also eyed the forecasts for lower 2004-05 U.S. and world wheat stocks. "Just seeing U.S. wheat stocks under the 500-million bushel mark is supportive, but wheat is also oversold and due for a correction," said one trader.
 
CBOT traders put initial calls at 3-5 cents per bushel higher for soybeans and up 1-3c for both wheat and corn. However they also warned that in this year's volatile market that price action is much harder to call.
 
Another trader added, "There is nothing really bearish in this report."
 
The reports included the first 2004-05 official balance sheets for U.S. wheat, corn and soybeans as well as the new marketing year figures for world grain stocks.
 
SOYBEANS
 
The USDA forecast U.S. 2004-05 soybean stocks to remain tight at 190 million bushels, which compares to the 2003-04 tightness of 115 million. Pre-report estimates had ranged anywhere from 150 million to 300 million bushels.
 
The USDA also trimmed the Brazilian and Argentine soybean crops again. Brazil 2003-04 soybean output is now forecast at 53.5 million metric tons, down from the previous estimate of 56 million. Argentina's soybean crop is now measured at 34 million tons, down from the April forecast of 35 million.
 
CORN
 
As many had anticipated, the USDA revised China's 2003-04 carryout forecast up 21.0 million tons. The USDA had issued a notice before the report that the China corn stocks figure would be revised.
 
The USDA now figures 2003-04 world corn stocks at 86.96 million tons, up from the former estimate of 67.7 million. The 2004-05 world corn stocks were then estimated to decline to 66.8 million.
 
U.S. 2003-04 corn endings stocks were also trimmed 50 million bushels to 806 million. The 2004-05 corn carryout was pegged at 741 million bushels, which was up slightly from the pre-trade estimate of 727 million. However traders said they were skeptical with a "very optimistic" 145 bushel per acre average 2004 corn yield.
 
WHEAT
 
In its first 2004 U.S. winter wheat production report, the USDA pegged the crop at 1.550 billion bushels, down from the 1.707 billion produced last year and almost exactly in line with the pre-trade estimate.
 
As expected, the hard red winter wheat class led the decline. Winter wheat output was also forecast to be down slightly on the year, but soft red winter production was pegged to be up slightly. The by-class estimates were almost exactly the same as the pre-trade estimates.
 
U.S. 2003-04 ending stocks were forecast to be down just 5 million bushels at 526 million. A decline in 2004-05 U.S. wheat carryout was also seen, with that figure coming in at 499 million.
 
Even though 2004-05 world wheat output was forecast to rebound by 40 million metric tons, the USDA still forecast a slight decline on the year for 2004-05 world wheat ending stocks. World wheat 2004-05 ending stocks were pegged at 123.3 million tons, compared to 128.8 million for 2003-04.