The U.S. Department of Agriculture on November 10 published its latest “World Agricultural Supply and Demand Estimates” report. In the report, USDA provided updated production data for the 2014 U.S. corn and soybean crops, as well as minor adjustments to the U.S. HRS and durum crops. Additionally, USDA updated supply and demand balance tables for U.S. and world crops.
Bill Lapp, president of Advanced Economic Solutions in Omaha, Nebraska, provided the following highlights from the November 10 report. To view the USDA report, click here.
- U.S. corn crop was revised modestly lower (and below trade estimates), but still forecast to be record large
- U.S. soybean crop was revised modestly higher (but below trade estimates), forecast to be record large
- U.S. HRS and durum crops revised modestly lower
- Very limited changes in world numbers
- 2015 pork output scaled back, while 2015 decline in beef output widened
The next World Agricultural Supply and Demand Estimates will be released on December 10 (without a crop estimate). However the next important USDA reports will be released on January 12, 2015, which will include the final estimates of the 2014 U.S. corn and soybean crops;, the December 1 stocks report; and the 2015 winter wheat seeding report
Overall the report does little to change the market outlook as the corn, wheat, and soybean end stocks forecasts for 14-15 were little changed.
Corn
- The US corn crop estimate for 2014 was reduced marginally (-68 mm bushels, yield reduced from 174.2 to 173.4 BPA)
- Ethanol use increased to 5150 mm bushels (+25)
- 14-15 end stocks now estimated at 2008 mm (-71 mm), equal to 14.7 percent of use, largest stocks-use since 05/06 and well above year ago levels (1236 mm, 9.1%)
There was little news contained in this report to rattle the corn futures market. USDA end stocks appear too high at 2.0 B, and it would appear the market agrees with this sentiment. December corn futures have rallied from $3.20 to near $3.70 over the past six weeks. Market may “tread water” through December and into the January 12 report, staying in a $3.50-3.70 range.
Soybeans/Soymeal
- U.S. 2014 soybean crop increased by 31 mm to record 3958 mm – up 600 mm (18 percent) from a year ago.
- USDA also revised up 14-15 usage by 31 mm (exports +10, crush +20)
- USDA leaves end stocks forecast at 450 mm (12.4 percent of use), largest stocks-use in eight years
- Estimate of 2014-15 Brazil crop (94 MMT vs. 86.7) and Argentine crop (55 MMT vs. 54) left unchanged
- China imports for 13-14 increased by 1.4 MMT to 70.4 MMT; 14-15 China imports left forecast at record 74 MMT
- U.S. domestic use of soybean meal during 14-15 forecast to increase by 2.0 percent to 30.1 mm tons
- U.S. soymeal exports for 14-15 forecast at 12.8 mm tons (vs. 12.0 mm last month) – up from 11.55 mm last year
Soybean futures have rallied from near $9.25 to near $10.25, but are still trading at lowest level since 2010. With a carryout of 450 mm, soybean price rallies may be limited. Soymeal prices, by contrast, have benefited from tight logistics (leading to very wide crush margins). But with large soybean supplies, current wide premium for front month soymeal not likely sustainable.
Wheat
- USDA made minor changes to the overall U.S. wheat balance table
- U.S. wheat crop reduced by 9 mm (HRS -5, durum -4)
As with corn, this report did not contain much in the way of market guidance. Key wheat futures market drivers for next 60 days include export demand, Australian wheat crop prospects, changes in the value of the U.S. dollar. Durum likely to remain extremely tight.
Bill Lapp, President, Advanced Economic Solutions
To contact Bill Lapp, email him at [email protected].
