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USDA Seen Overstating Demand Wednesday, Analyst Says

DES MOINES, Iowa (Agriculture.com)— The U.S. corn and soybean exports have been seeing spotty upticks of activity, but not enough for the markets to be convinced that demand has turned a corner. For that reason, the USDA is expected to raise its U.S. ending stocks Wednesday, as it releases its March Supply/Demand and Crop Production Reports at 11:00 a.m. CT.

So far this year, the U.S. corn exports are off 22%, wheat sales are down 17% year-to-date, and soybean exports are weaker by 11%. 

In its report Wednesday, the trade sees the USDA estimating the U.S. corn 2015/16 ending stocks at 1.854 billion bushels, slightly above the agency's February estimate of 1.837 billion bushels. For soybeans, the USDA is seen pegging the U.S. ending stocks at 452 million vs. the February estimate of 450 million. And for U.S. 2015/16 wheat ending stocks, the government is expected to come in at 975 million bushels vs. its February estimate of 966 million.

Also, the USDA is expected to slightly raise its estimates for world corn and soybean ending stocks.


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David A. Kruse, CommStock Investments, says that he is not looking for anything greatly different than what the USDA released in its Annual Ag Outlook last week.

“The USDA is modeling the soybean crush and all exports still too much on the high side of expected consumption. I do not believe that the demand base has yet responded to low prices enough to justify USDA usage estimates. That means that the USDA carryovers are understated,” Kruse says. I believe the actual corn carryover will be closer to 2.0 billion bushels, and the soybean carryover will exceed 500 million bushels. But USDA will take months making incremental adjustments to the balance sheet to reflect that.”

Kruse adds, “While it would not feel that way to farmers hoping for higher prices, the USDA is actually helping them by overstating demand in the current balance sheet making demand fundamentals appear better than they are.”

The quarterly stocks report at the end of the month will give a better picture of how demand has responded to supply. Low prices cure low prices eventually, Kruse says.


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