WASDE bearish corn, bullish wheat, soybeans
The U.S. is making more ethanol, using an additional 50 million bushels of corn. But, exports are seen dipping by the same amount, adding up to a likely bearish combination for the grain trade.
That's the verdict from Tuesday's USDA World Agricultural Supply and Demand Estimates (WASDE) that also shows a slightly bullish combination of lower U.S. soybean supplies and use projections for the coming marketing year.
"Lower beginning stocks reflect increased export and crush projections for 2011/12. Soybean exports for 2011/12 are raised 20 million bushels to 1.335 billion bushels reflecting increased global import demand, led mainly by higher projected imports for China," according to Tuesday's report.
- See more from the WASDE report
- Get more on the WASDE numbers
- Marketing Talk: Chat how the trade's digesting the numbers
The saving grace for corn prices could come from the wheat pit, as Tuesday's WASDE numbers are bullish wheat, with lower expected U.S. wheat supplies by 51 million bushels with "reduced carryin and lower forecast winter wheat production," according to USDA's report. Despite the bullish numbers, though, wheat traded immediately lower after Tuesday's report was released.
"Beginning stocks are lowered 40 million bushels with a 10-million-bushel increase in food use and a 30-million-bushel increase in exports for 2011/12. The increase in 2011/12 food use reflects higher-than expected flour milling during the January-March quarter as reported by the North American Millers’ Association. Exports are increased based on the strong pace of U.S. shipments during the final weeks of the old-crop marketing year," adds Tuesday's report.
The trip-up in the corn numbers in Tuesday's report is in exports, which have been lagging lately. That pace, combined with growing competition overseas will likely move corn prices lower.
"Corn exports are projected 50 million bushels lower as shipments and sales continue to fall off of the pace needed to reach last month’s projection," according to Tuesday's WASDE report. "Tight domestic supplies and increased competition, especially from Brazil, are also expected to reduce U.S. export prospects during the summer months. Projected corn ending stocks for 2011/12 are unchanged, as is the 2011/12 season average farm price which remains at $5.95 to $6.25 per bushel."
Traders said shortly after the report was released, the usual focus wasn't as laser-sharp on the WASDE report as it has been in the past, partly due to the fact that pit trading began Tuesday at 7:20 AM Central Time, just before its release. And, farmers say the market's focus on the weather likely won't wane.
"I think I remember in the U.S. we have NEVER had 3 years in a row where the average corn yield was below trend line. Isn' that what some guys were saying earlier this year?" says Agriculture.com Marketing Talk senior contributor highyields. "Well, I think we are starting to drift that way now. Let's play this scenario. We have a less-than-par corn and soy crop in the U.S. this year. Then El Nino stays away and South America has another tough year down there. Even if China demand drops some, where does that leave us on soybean stocks?"
Regardless of whether traders in Chicago pay much heed to Mother Nature in the coming days and weeks, it's clearly an area of major concern in corn and soybean country. An Agriculture.com poll released Monday shows 76% of those farmers responding say their crops need considerable rain and, even if they do get it, they "may not get to full yield potential."