Trade watches soybean weather
USDA Crop Production and WASDE: The very most key points to the August report are as follows; Old Crop Soybean stocks of 575 mil bu was 11 million bu than the pre release ave with new crop soybean stocks of 220 mil bu. You would have to venture back to 2003 to find fewer domestic stocks. World wheat stocks are projected at 114.8 million tonnes, 1.75 MT less than the July estimate. You would have to fall back to 1980 and 1981 to find fewer stocks of 113 MT and compare to yr ago levels of 124 MT and 149 MT in 2005. The projections suggest a fourth consecutive year of declining stocks. World corn stocks dropped 6.16 million tonnes and are now projected to be 102.2 MT vs year ago levels of 101 MT and two years ago of 123 MT. The season average farm price for corn and soybeans were left unchanged from the July estimates of $3.10 and $7.75 respectively. The season average farm price for wheat was increased by 30 cents/bu and is a new record of $5.40/bu. It is the first time in history the season ave farm price would exceed $5/bu and only the fifth time above $4/bu.
Corn Fundamentals: USDA raises 2007 corn production by 214 mil bu but projected end stocks were increased by only 14 million bu, Export projections were increased by 150 mil bu, see Weekly Export Sales Observation section below. Bullish to see USDA recognizes with thin projected world stocks and even with record USA corn production, demand is surfacing very early in the new marketing year. Strong weekly new crop corn export sales is supportive to futures as well as soybean's worries of sufficient rain for pod fill. Also supportive to corn futures is the technical strength in the wheat futures. Demand for US corn remains strong. Bearish to corn is wheat's vulnerability to profit taking by funds and locals and unforeseen thunderstorms for the soybean crop. We need to add, by late Friday, private forecasters are suggesting less heat by the middle of next week and thunderstorms which could drift further south in the Midwest which could be perceived as bearish to futures.
Ethanol: Based on the first nine months of ethanol production data, USDA needs to cut the amount of corn used for ethanol production back by 19 mil bu from its standing target of 2.15 bil bu. Within the August WASDE, released on Friday, USDA left demand unchanged. Word is USDA realizes some trimming needs to be done but is butting heads with the Dept of Energy and the US Census Bureau. USDA had targeted a 34% yr on yr increase in corn use for ethanol production, only the months of April and May have exceeded the target. The pace needed per month in order to reach USDA present use of 2.15 bil bu is now 47% above yr earlier levels. Ethanol stocks as of May stand at 9 million barrels vs 7.8 one year earlier.
New Crop Marketing: Based on our most recent price projections, Dec corn futures in a downward correction and estimated bottom near the 3200-3300 level. With the recent low of 3244 made on 7/23/07 Dec corn has met our downside correction and may have found its seasonal bottom on 7/23. We do not recommend forward contracting at present levels. Before Dec corn expiration futures are expected to work back towards 3700-3800 level. End users and producers, use the preceding information for your individual marketing needs.