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First look at 2010

Agriculture.com Staff 02/11/2016 @ 12:36am

With the USDA's May supply/demand report released on Tuesday, there is more of a framework to discuss the 2010 crop situation.

The USDA, in their world crop data, has a theme of increasing demand in the coming year with even greater increases in crop sizes. The effect is generally increasing carryouts in the world for the major crops-wheat, corn and soybeans.

For soybeans specifically, the USDA has raised Chinese purchases slightly. However, for the first time in several years, their carryout does not increase. In years past, part of their purchases went to increasing their stocks of beans. This was part of the Chinese purchases of all types of commodities during the market weakness of 2008-2009.

What the USDA is missing in their numbers is the situation with Chinese corn purchases. They have essentially zero corn imports from the US in this crop year and next. In fact, they do not even have the kind of purchases that China has already made (115,000 metric tons two weeks ago plus 369,000 metric tons announced Thursday, plus perhaps 174,000 metric tons to unknown). So if the volume of trade with China grows in the coming months, there will be some adjustments to the tables.

These purchases of corn are in addition to ever increasing DDG purchases by China. They used to take containers of DDG's-now they are taking boatloads as well. China is currently the second largest purchaser of DDG's, behind only Mexico. The pork industry in China does not have the reservations US producers have regarding feeding DDG's. The popularity of DDG's underscores the Chinese demand for protein. Plus it is a very cost effective feed ingredient for them and is not subject to tariffs.

In the coming months, analysts will be on the lookout for any other trends the USDA might have missed. First on the list will be "is the USDA correct regarding larger crop sizes worldwide?" After all, the world needs to grow it to trade it!

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

With the USDA's May supply/demand report released on Tuesday, there is more of a framework to discuss the 2010 crop situation.

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