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Grains Mix Up Despite Low USDA Ending Stocks Number

Jeff Caldwell 05/09/2014 @ 11:08am Multimedia Editor for Agriculture.com and Successful Farming magazine.

Corn use in the U.S. has slipped lower in recent months, and that's got USDA opening up a slightly lower price range looking further into the 2013-2014 marketing year. That's according to Friday's monthly USDA World Agricultural Supply and Demand Estimates (WASDE) report.

That sent the corn market off onto a mixed trail, while more bullish numbers -- namely a 130 million-bushel carryout number for the 2013/14 marketing year -- sent soybeans trading higher Friday after the report's release.

"U.S. soybean exports are projected at 1.625 billion bushels, up 25 million from 2013/14 on record supplies and competitive prices. Despite gains in use, ending stocks for 2014/15 are projected at 330 million bushels, up 200 million from 2013/14, increasing the stocks-to-use ratio to 9.6%," according to Friday's report. "Corn ending stocks are projected at 1.7 billion bushels, up 580 million from the 2013/14 projection. With the larger carryout, the season-average farm price is projected at $3.85 to $4.55 per bushel, down from $4.50 to $4.80 per bushel for 2013/14. "

Friday's report pegs a price range of $9.75 to $11.75 for soybeans into 2015, down $13.10 per bushel this marketing year.

The story of the report, says broker and market analyst Don Roose of U.S. Commodities, lies in the old crop. Ending stocks were lowered for both corn and soybeans, with the latter at historical lows. Surging exports do help offset that number for corn, but there's a lot of inventory yet to be moved to customers abroad. Combined with the shaky prospects of both a potential in-season weather scare and the tendency for "big crops to get bigger," that inventory could keep both grains in choppy trading territory moving through Friday's session.

"When you look at the report, the bull story is in old-crop U.S. supplies. Ending stocks on corn were ratcheted down, soybean stocks were ratcheted down to 130 million bushels. That's about the bull story," Roose says. "After that, U.S. ending stocks were a negative number, but acres tend to grow from here. Soybeans could grow too. Those, along with the world numbers, are an anchor.

"Corn exports were really where the difference was. Took them up 150 million bushels. Do you really believe that's going to be the case? We have a record amount of unshipped corn right now."

How should Friday's WASDE data be considered, trading-wise? The continued tightening of domestic corn and soybean supplies could present more selling opportunities down the road, namely when it comes to old-crop supplies.

"If I'm a farmer, I look at it as an opportunity to get some catch-up sales on new-crop," Roose says. "With a balance table tightened on every month for corn since January, our margin of error is less, especially if we have a weather problem."

Moving forward, though the market and many of its participants may have been a little off-the-mark pegging Friday's numbers and market responses, the market will absorb the information as planting weather and progress continues to dominate the trade's attention moving through May and beyond, according to Sal Gilbertie, chief investment officer of Teucrium Trading LLC.

"Today’s report shows a much improved balance sheet for soybeans across the globe; this has been a long time in coming and is welcome news to consumers and end users of all soy-related products. Anticipated corn yields are surprisingly high vs. industry expectations, boosting expectations for a healthy 2014/15 carryout," Gilbertie says. "Planting progress over the next three weeks will be closely watched to see if the USDA yield estimates can hold for the coming year."

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