Tim Hannagan: New grain year
Thursday's USDA monthly crop report came out as expected, a real yawner, yet a few surprises based on pre-report estimates by the brokerage houses.
This report was all about the amount of grain from monthly adjustments that would be left over come the start of the new grain marketing year. It's the ending stocks that essentially represent our grain savings account to be a buffer from a weather problem or unexpected demand.
Wheat's new marketing year begins June 1, with the start of our winter wheat harvest. The crop report put ending stocks on that day to be 843 m.b., up 25 m.b. from the months prior. Traders had expected a 8m.b. drop. They raised global stocks in key US competing exporting countries Australia and Argentina. This had them lower our US exports. It's a non-issue, whether the number was 20m.b. more or less, as we're still sitting on ample stocks; over 800 m.b.
It's now all about production and the weather's ffect on emerging winter wheat fields in the Southwest. Next week's forecast for Texas north to Kansas, 90% of our hard red winter wheat acres, is much warmer than normal and dry. As we break dormancy on the weather change, badly needed rains are needed. Most weather gurus see the rest of March as warmer and drier than normal. Crops went dormant with the lowest crop ratings in recent memory, so wheat will be challenged to find better than perfect weather the next 80 days, when the growing season finishes off.
Soybean ending stocks for September 1, the beginning of the soybean new marketing year and harvest, were put at 140 m.b., unchanged from the months prior and 151 a year ago. They simply left everything from exports to the crush alone. Traders had anticipated a slight increase in ending stocks as Brazil ,the worlds number two producer exporter, has increased their crop size, the last month. This automatically has traders thinking they sell it at our export expense, like years past.
But, we're in a different world marketing environment now with the new theme: A COUNTRY THAT SAVES, PLAYS. Meaning, countries are saving more grain and exporting countries that build reserves have grain to play with in our volatile twelve-month demand scenario we're experiencing. Brazil used to sell everything at harvest and store nothing. They would watch prices rally yearly into summer highs and witnessed the US exporters cashing in on yearly high prices, while they sat empty. So, though Brazil's crop is larger, they actually are selling less beans for near-term delivery and holding back inventory to sell later, leaving US exports a little better especially to China.