USDA data seen bullish wheat, bearish soybeans, neutral to bullish corn
A tightening of the U.S. corn supply, a sharply lower wheat production estimate and a bigger soybean crop estimate could be the features of this Friday's USDA monthly report.
Ahead of the first USDA crop estimates for 2006/2007, analysts see the data as being bearish soybeans, neutral to bullish corn, and bullish wheat.
Shawn McCambridge, Prudential Securities senior grains analyst, said the winter wheat report would carry the most weight of all the crops, mainly due to hard data coming from recent yield estimates.
"A new winter wheat estimate will be released Friday, most likely coming in lower than previous USDA estimates, causing a tighter balance sheet for next year," McCambridge said.
A sharply lower crop estimate has already been factored into the market. So, the new USDA estimate will continue to provide underlying support for this summer, McCambridge said.
On Friday, McCambridge sees a USDA winter wheat production estimate of 1.385 billion bushels, within range of other private estimates, and lower than 1.494 produced in 2005. Allendale Inc., estimated winter wheat production at 1.384 billion bushels.
For 2005/2006 U.S wheat ending stocks, McCambridge estimated 461 million bushels, lower than USDA's most recent forecast of 532 million.
"This ending stocks figure is a tighter number and supportive for the market. Plus, keep an eye on the breakdown of wheat by class. Hard red winter wheat supplies will be the tightest of all of them."
Allendale Inc., estimated 2006/2007 ending wheat stocks at 366 million bushels.
Jason Ward, North Star Commodity Investment Company, said Friday's report would be of interest to the market.
"I think we'll see the USDA lower 2006/2007 corn ending stocks to 1.50 billion bushels with the increase of corn going toward the production of ethanol," Ward said. "Plus, the exports have been going very well in the last month."
Ward estimated 2006/2007 corn production at 10.67 billion bushels.
Because Friday's report for corn will be based on statistical data and not hard data such as yield proof, McCambridge expects traders to pay little attention to it.
Prudential Securities estimated 2006/2007 corn production between 10.7-10.8 billion bushels.
For 2006/2007, McCambridge expects the USDA to estimate corn carryout at 1.4-1.6 billion bushels. That compares to USDA's April 2005/2006 corn carryout of 2.301 billion bushels.
"That still is a comfortable number, so the market will digest this figure quickly and revert back to watching weather and planting conditions for direction," McCambridge said.
Expansion in livestock production, ethanol usage, and the anticipation of a lack of competition from China in the world export market all will contribute to an increase in U.S. corn demand for 2006/2007", McCambridge said.
With a 2006/2007 soybean production estimate of 3.06 billion bushels, Ward doesn't see Friday's report helping the soybean market.