The USDA stocks numbers are the biggest concern for the market tomorrow.  Trade estimates for these numbers fall in a wide range, assuring that someone will be surprised.

The estimates are:

                        Average               Range

Wheat              2.035               1.959-2.143

Corn                0.964               0.835-1.050

Soybeans         0.225               0.202-0.240

The wide range is due to uncertainties regarding feed use.   Not only are there questions regarding total feed use, but there are big questions regarding wheat substitution for corn in feed rations.  

Recently, the stocks numbers had the ability to surprise the market by being sharply higher or lower.  It has happened in corn for almost every report in the past year.  Last year’s September 1st numbers were 300 million bushels larger than expectations, causing a bearish reaction.  This prompted questions about whether new crop corn was present in the old crop ending stocks number.  The USDA was even forced to make further comments regarding the accuracy of the data.  Then they refined the questions for this 2011 report in an attempt to get a more accurate answer.  

The December 1st numbers caused a substantial bullish reaction-the opposite of three months earlier. These stocks were 300 million bushels smaller than expectations.  Did the USDA just “correct” their earlier error?      

This year, the wheat stocks will also be important as market participants make judgments regarding the amount of wheat feeding that is occurring.  The June-August quarter is always the largest quarter of wheat feed use.  Given that cash wheat (especially soft) is cheaper than cash corn, the market needs a handle on just how much substitution is occurring.  

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