Wednesday, April 11, 2012

International Markets Wrap Up After WASDE

Monthly USDA report was released after the Easter break and although ending stocks are all lower, bit of a bearish surprise was US corn stocks left unchanged, while wheat usage was bumped higher. Bullish indicators for soybeans continue with Brazilin output pegged much lower then forecast and continuing declining bias expected. Corn looks a bit bearish for the time being, and wheat may get dragged down with it, especially given with ideal conditions in the US. Strong gains were tempered by recent strong gains in the quarterly stocks report.

The USDA pegged US wheat ending stocks slightly lower due to a higher feed usage,  whilst Chinese feed usage was revised higher by 2mmt, which contributed to world ending stocks being -3.31mmt (206.27mmt). Although still at high levels, world-ending stocks are 6.83mmt lower then they were just a couple months ago. Fundamentally, wheat is still looking at some long-term bearish price sentiment given that the world is awash with wheat.  Global stocks to Use ratio (which is the level of carryover stock for any given commodity as a percentage of the total demand or use) is sitting at a very comfortable 30%, this compares to 36% in the States and 34.4% in Australia. So this is why APW prices have been stagnate over the last four months.

US corn usage and ending stocks for the 2011/12 season were surprisingly left unchanged from March.  With the smaller than expected March 1st stocks, the trade had expected some adjustments higher in demand.  The USDA did mention better wheat feeding into the summer and also believe that feed usage for the season will decline for old crop corn because new crop corn will be available in August. US ethanol demand was left unchanged (127mmt), even in the face of reduced daily ethanol production in recent months. World corn ending stocks were revised lower, largely on the back of lower Argentinean production and adjustment to beginning stocks for China (-4mmt to 49.42mmt).  Current stocks/usage level of 14.1% is the lowest since the 73/74 crop. US stocks are even tighter at 6.3% this compares to 13.1% in 09/10.

The corn market has now given back near 50% of the gains from the bullish March stocks and acreage reports. On days with very little news to support the market, thinking will always hark back to the monster 95ma corn crop that is in the early stages of being sown. That may keep price action subdued, unless crop problems emerge, maybe expect bearish sentiment to emerge as the trade focus on large early season yield projections.

The USDA pegged US soybean ending stocks at 6.80mmt (-680kt) while exports were pegged 410kt higher at 35.11mmt. Continued lower Sth American production was lowered 4.80mmt to 115.2, this compared to 134.60mmt in Nov. However further cuts may be warranted in the next report for South America, as some private analysts have cut much lower estimates. Chinese imports were left unchanged at 55mmt, with March soybean imports at 4.83mmt. The first three months of 2012 imports are now 22% higher then last year at 13.33mmt.

North American sowing/growing prospects continue to be ideal, and with more rain expected next week will help southern winter and early-planted spring wheat crops. Weekly US winter wheat crop condition is 61% excellent – good, this is well ahead of last year when only 36% was in this category. 21% of spring wheat planted has been planted, this +18% ahead of last years wet weather delayed plant. Total US corn planted is 7% + 5% ahead of the 5-year average, with some inroads being made in the main production states of the US Midwest. 

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