October 1, 2008

 

Larger than expected US corn and soy stocks bearish for markets

Traders and analysts said Tuesday's USDA's wheat production and stocks data were neutral for CBOT wheat futures, while larger-than-expected quarterly stocks for corn and soy is seen as bearish for those markets.

 

CBOT wheat futures are expected to open 5-7 cents higher, with corn expected to open 3-5 cents lower, and soy down 5-10 cents.

 

Corn stocks up as more wheat replaces corn for feed

 

Fourth quarter corn stocks for the 2007-08 marketing year were estimated at 1.624 billion bushels as of Sept. 1, compared to the 1.546 billion average analyst estimate and the 1.576 billion carryover stocks estimate in September by the USDA.

 

The report is bearish for corn, said Citigroup's Terry Reilly. "We fed a lot more wheat than we thought. The implied wheat for feed during the summer quarter was about 80 million bushels above our estimate, so we fed a lot more wheat than we thought and a lot less corn than we thought.

 

"Obviously the dip in wheat prices had a profound effect on users' choice for feed," Reilly said.

 

Soy stocks 42 percent larger than expected

 

Soy stocks in the fourth quarter of the 2007-08 marketing year were estimated at 205 million bushels as of Sept. 1, the USDA reported, above the average analyst estimate of 144 million bushels and the 140 million bushel carryout in the September supply and demand report.

 

"The 2007-08 soy production estimate, the upward revision, was pretty much in line with our thinking. There were a lot more beans out there than we thought. That's going to be pressuring prices all day in the beans. Beans will be leading the rest of the CBOT grain markets probably lower," said Reilly.

 

The USDA revised up 2007 soy production to 2.68 billion bushels, up 90.6 million bushels from the previous estimate. Planted area was revised up 1.11 million acres to 64.7 million acres. Harvested area was revised up 1.32 million acres to 64.1 million acres. The 2007 yield, at 41.7 bushels per acre, is up 0.5 bushel from the previous estimate, according to the USDA.

 

The higher-than-expected figure should provide pressure for prices, as the data show things were not as tight as previously expected, said a CBOT floor trader.

 

However, after a limit down close Monday, and supportive outside market influences, downside movement seems a little overdone, the trader added.

 

However, traders said reports of 10-20 cent cash protection were seen pressuring futures prices.

 

Wheat crop production higher

 

The USDA estimated 2008-09 all wheat crop production at 2.500 billion bushels, above the average analyst estimate of 2.459 billion and the 2.462 billion the USDA estimated in August.

 

Quarterly wheat stocks were estimated at 1.857 billion bushels, lower than the average analyst guess of 1.932 billion.

 

"I think wheat is probably the most positive of the three," said Chad Henderson, analyst with Prime Ag Consultants.

 

In overnight trading, CBOT December wheat ended up 14 1/4 cents at US$6.82 1/4 per bushel.

 

All winter wheat production was pegged at 1.868 billion bushels compared to the 1.872 billion average analyst estimate and the 1.875 billion estimated by the USDA in August. Hard red winter wheat production was seen at 1.035 million bushels compared to analysts' estimates of 1.053 billion bushels and the 1.055 billion estimated in August by the USDA.