The USDA released its monthly Supply/Demand and Crop Production estimates today with the reaction being positive across the board for the grain markets. The major market movers were revisions lower to corn ending stocks for 2012/13, increases to soybean export sales and crush, and lower global production figures for wheat. After all was said and done, corn was up 36 ¾ for DEC, soybeans up 26 on NOV, and wheat up 15 ½ on DEC CBOT. Let’s look at the numbers a little more closely.
For corn, the revision to the ending stocks for 2012/13 was driven by a lower carry-in number from the Quarterly Grain Stocks report and by a slight reduction in yield. Even though the report showed an increase of 300,000 harvested acres and an export sales reduction of 100 million bushels, it could not cover the steep cut to the projected ending stocks. Feed use and ethanol demand were left unchanged showing prices need to move higher to further curtail demand. December corn has not traded this high since September 17th.
Soybean supplies came in larger than analysts expected with yield being revised higher to 37.8 bushels per acre and production at 2.86 billion bushels. The harvested acres were revised an astonishing 1.1 million acres higher too. To counteract the supply upticks, the demand for soybeans was boosted for export sales and crushings by 210 million bushels and 40 million bushels respectively. After accounting for these revisions, ending stocks were only increased 15 million bushels to a tight 130 million bushels.
Wheat has traded in a range for the better part of three months and was, for the most part, a follower of the corn and soybean markets today. Global production did take a hit however; with Australia’s production losing 3 million metric tons, Russia’s harvest falling 1 million tons, and the European Union’s total dropping 800,000 metric tons. Domestically, feed and residual use remains robust and received a 95 million bushel uptick, while export sales reflected a slower pace losing 50 million bushels. All in all, ending stocks were projected lower by 44 million bushels.
The central idea to take away from this month’s Supply/Demand and Crop Production reports is that demand is still relatively strong giving the higher prices over the last couple of months. Especially, export demand for soybeans, feed and ethanol for corn, and feed for wheat. As we move through this marketing year, export demand for wheat has strong potential to pick up significantly as the short production internationally will become more and more apparent. South America is in the heart of planting what could be a record crop, so weather in the southern hemisphere will have to be monitored closely throughout our winter season.
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