New-crop themes emerge
USDA analysts took their first stab at forecasting new crop demand in Thursday's supply and demand tables. Given much of the crops analyzed in the report aren’t even planted, it is hard to focus on all the details. There will be plenty of months to figure out that.
Here are some big themes:
The USDA has begun to forecast a tighter situation in world wheat. This 2012 crop is smaller in several different parts of the world, including major exporters. The US is one country where crop size will increase. Therefore, the potential exists for demand to come to the US. As often is the case, the US will have the bulk of the available exportable supplies.
For corn, some foreign countries are projected to see small increases in crop size (remember how early in the crop season it really is). The US, however, is the huge increase in world supplies. Weather watchers will focus on US and Chinese weather.
Speaking of the Chinese, the USDA did raise its estimate of Chinese corn imports to 5 mmt, which is about the sales that they have on the books right now. For the new crop year, the USDA forecast 7 mmt of imports. There are estimates out there that are larger. It makes the USDA’s initial export forecast of 1.9 billion bushels look a little light.
For soybeans, the USDA seems to be confirming what market participants have been talking about-there really aren’t enough soybeans to go around. USDA analysts have been gradually increasing demand and lowering the old crop carryout in response to smaller South American crops. In this report, crush was increased 15 million bushels and exports were increased 25 million bushels. Carryout now stands at 210 million bushels.
The USDA started off the new crop projections with some very tight numbers using a crop size that is projected up 150 million bushels from last year. However, total demand is estimated up 200 million bushels, leaving a carryout of only 145 million bushels. But here is the rub. To get to this sort of “minimum” carryout, the USDA had to reduce usage a total of 50 million bushels from what was projected at the Outlook Conference. Crush was reduced 5 million bushels and exports were reduced 45 million bushels.
So, compared to previous projections, they increased old crop demand 40 million bushels but had to cut new crop demand by 50 million bushels. In a more normal situation, reduced South American supplies would cause increased US demand in both crop years.