October 1, 2007

 

USDA Report: Corn, soy usage less than expected

 

 

Corn and soy usage in the fourth quarter of the 2006/07 marketing year as tallied by the government was less than analysts anticipated and could lend pressure to prices for those markets on Friday (September 28).

 

First-quarter usage for the 2008/09 marketing year for wheat was greater than expected; additionally, 2007 wheat production was smaller nearly across the board when compared to industry ideas. That is expected to lend support to an already bullish market that has scored all-time price highs.

 

The US Department of Agriculture Friday said in its quarterly grain stocks report fourth-quarter stocks for corn were seen at 1.304 billion versus an average of analyst estimates of 1.147 billion bushels. In 2006, corn stocks were 1.967 billion bushels. USDA on Sept. 12 put corn ending stocks for the 2006-07 at 1.142 billion.

 

James Bower, president of Bower Trading, said the hike in corn stocks was a surprise. "I think the market was caught off guard," Bower said.

 

Jerry Gidel, grain analyst of North American Risk Management Services, said the higher corn stocks suggested lower feed usage.

 

The corn figure, even though it is higher than expectations, still implies "great usage," said Joe Victor, vice president of marketing Allendale Inc. He added the stocks number suggests a 63 percent drawdown. The analysts spoke at a press briefing sponsored by the CME Group following the USDA data.

 

Fourth-quarter stocks for soy were seen at 573 million versus an average of analyst estimates of 552 million bushels. In 2006, soy stocks were 449 million bushels. USDA on Sept. 12 put soy ending stocks for the 2006-07 at 555 million.

 

The drawdown on stocks for soy is disappointing, Victor said, as the number represents a 47 percent usage rate versus a 62 percent usage rate over a five-year average. While 2006-07 year's stocks are large, Victor pointed out because of the much lower US acreage for this season, stocks for 2007-08 will be much smaller.

 

That lower acreage is the focus for what the soy trade, the analysts said, so the fourth-quarter data will likely have a very short impact on prices. The drop in acreage is lifting Chicago Board of Trade soy prices sharply, with current prices over US$10 a bushel.

  

First-quarter stocks for wheat were seen at 1.717 billion versus an average of analyst estimates of 1.832 billion bushels. In 2006, wheat stocks were 1.751 billion bushels. The data was considered price-supportive.

 

Gidel said this lower stocks data means USDA will have to drop wheat ending stocks in the October supply and demand report due out in about two weeks. It appears the wheat in the Southern Plains damaged by the spring flooding was sold off as feed wheat.

 

"Wheat had the highest usage since 1998-99, with a 35 percent drawdown... The five year average is 30 percent," Victor said.

 

In addition to the wheat stocks data, USDA released 2007 production figures, nearly all of which were lower than expected.

 

All-wheat production was estimated at 2.067 billion bushels in the small grains summary. The average estimate of analysts was 2.119 billion bushels and in the August crop production report USDA estimated total wheat output at 2.114 billion bushels. In 2006 production was 1.812 billion.

 

This data is also expected to lead to adjustments on the USDA October crop production report, the analyst said. Bower said given the smaller crop and the wheat crop losses worldwide, USDA might have to consider removing some environmentally sensitive land currently enrolled in the Conservation Reserve Program back into farming.