Friday, March 11, 2011

No surprises in this month USDA Report

The USDA released their latest Agriculture Supply and Demand Estimates report overnight. World feed grain stocks have been raised slightly as lower use more than offsets lower production. Despite the slight revision, feed grain supplies are in-line with historically low 2006/07 levels. US corn stocks were left unchanged at an extraordinarily tight 17 mmt.

World wheat inventories for 2010/11 were raised by 4 mmt (Australia crop +1mmt to 26mmt) to 182 mmt, reflecting lower consumption (in both the livestock feed and human food categories) and increased production in the southern hemisphere. The global stock-to-use ratio, at 27.4%, indicates old-crop wheat supplies are not short. The USDA lowered its import estimates for the Middle-East & North Africa region.

US wheat stocks have been increased this month because of lower exports. This was probably the only real surprise form the report, as it was first thought that exports were at a cracking pace. US exports have been reduced by 680,000/t, with stocks increased by this margin to 23mmt (34% stock-to-use ratio). In 2007/08, US stocks fell to 8.3mmt (13%), therefore, from a relative perspective, current supplies are ample.

World soybean and oilseed stocks were lifted slightly this month. A larger soybean crop for Brazil, up 1.5 mmt (record 70mmt), was largely offset by an increase in use and beginning stocks. Chinese soybean import estimates were raised. US soybean stocks were left unchanged at a tight 140 million bushels.

This report, as expected didn’t fire many shots in reviewing old crop stocks. The anticipation is building for the first big report for the year, the USDA Prospective Planting Report on the 31st March. This will give the market some indication if the previous rally in prices “bought” enough acres for spring plating.

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