USDA seen lowering South America's soy production
The USDA is scheduled to release updated supply and demand estimates along with world production Tuesday at 7:30am CST.
Because of a drought, the general consensus is the USDA will lower South America's soybean production.
Matt Pierce, Futures International LLC says the market watchers will have their eye on USDA's estimates for South America soybean production. A 10.0 million metric tons reduction is expected, Pierce says.
"Right now, USDA has Argentine soybean production at 49.0 million metric tons of soybeans. We have to see that number come in Monday at 43.0 million metric tons or under," Pierce says. "USDA has Brazil soy production at 59.0 million metric tons, a number that needs to be closer to 57.0."
Outside of South America numbers, traders will be watching for any change in U.S. corn exports. "After trickling at a slow pace, we have seen a pickup as of late. On soybean exports, aside from last week, we've been pumping out 1.0 million metric tons for the last five weeks. So, USDA will have to raise export numbers," Pierce says.
Also, CBOT traders and analysts see the average estimate for U.S. 2008-09 soybean ending stocks at 203 million bushels, below USDAâ€™s January estimate of 225 million. For corn, the average analysts' estimate for U.S. 2008-09 corn ending stocks is 1.838 billion bushels, lower than USDAâ€™s January estimate of 1.790 billion. For wheat, the average analysts' estimate for U.S. 2008-09 ending stocks is 649 million bushels, slightly below the USDAâ€™s January estimate of 655 million.
Jason Ward, Northstar Commodities Inc., says the USDA is likely to lower the U.S. soybean crush number again this month. "Plus, the U.S. soybean export target the USDA has set is maybe a little low, so the biggest risk we have is they lower the crush number without raising the export target. Those two have counterbalanced in the past. But, with Brazil beans coming on with their harvest, we are seasonally going to start to lose some export business to South America. The crush will continue to weaken as contraction of the US livestock herd continues at a rapid pace. Profitability is terrible in this sector."
For corn, Ward says the two numbers in the upcoming USDA report he will watch are exports and ethanol usage.
"In USDA's January report, corn used for ethanol was estimated at 3.6 billion bushels. Since then, we have lost approximately 600 million gallons of ethanol production and this 3.6 billion bushel number is in jeopardy of being lowered," Ward says.
The export target that USDA set for corn has been slashed in the past three reports. However, with three consecutive strong weeks of exports, the USDA is seen leaving this number alone, Ward says.
"I feel the corn used for feed number is where it should be. I am really focusing on that corn used for ethanol number," Ward says.
Meanwhile, Ward sees the South American weather starting to lose some of its market punch, instead I think more important factors are the Japanese Yen, the Chinese stock market, which are at new 3-month highs.