USDA cuts corn, soybean ending stocks

Mar 13, 2009
by DTN
USDA cuts corn, soybean ending stocks

USDA last Wednesday lowered both U.S. corn and soybean ending stocks for 2008-09 as higher ethanol use buoyed corn usage while soybeans got a bump in record exports to China.

“U.S. ending stocks should be viewed as bullish for both corn and soybeans,” according to DTN Senior Analyst Darin Newsom, with US- DA’s projection for ending stocks in both corn and soybeans coming in lower than industry pre-report estimates.

Ending stocks figures should be considered bearish for wheat, Newsom added. While U.S. stocks were lowered in corn and soybeans, the supply and demand report increased world ending stocks for corn by nearly 8 million metric tons and slightly increased world ending stocks for soybeans.

“World ending stocks should be viewed as bearish for all three grains,” Newsom said. “Corn ending stocks climbed to 144.62 million metric tons due to an increase in beginning stocks and a decrease in total demand. Soybean ending stocks increased slightly to just below 50 million metric tons. Decreases in beginning stocks were offset by a slight decrease in total demand.”

USDA also cited higher wheat imports and lower food use to increase ending stocks for wheat while also declaring record world wheat production for 2008-09.

“Wheat ending stocks jumped to 155.85 million metric tons, putting ending stocks to use at 24 percent. Beginning stocks and production increased while demand decreased,” Newsom said. USDA dropped projected U.S. corn ending stocks to 1.74 billion bushels for 2008-09, compared with 1.79-billion-bushel estimates in February. This month’s projection was about 60 million bushels lower than the pre-report analyst estimates.

“Corn ending stocks came in lower than expected at 1.74 billion bushels due to a 100 million bushel increase in ethanol demand combined with a 50 million bushel decrease in exports,” Newsom explained.

USDA stated corn use for ethanol is projected at 100 million bushels higher on indications of improving blend incentives and higher ethanol use. Ethanol production is projected to use 3.7 billion bushels of corn for 2008-09.

“Blend margins have become increasingly favorable since late February as gasoline prices have risen relative to those for ethanol,” USDA’s report stated.

USDA also bumped up projected corn prices for farmers in 2008-09 from last month’s projections. USDA projects the season-average corn price to be from $3.90-$4.30 a bushel, compared to last month’s projections of $3.65-$4.15 a bushel.

In soybeans, USDA projected 2008-09 ending stocks at 185 million bushels, down from 210 million bushels estimated in February. The March numbers were lower than the average pre-report guess of 195 million bushels.

“The ending stocks to use dropped to 6.2 percent,” Newsom added. USDA cited increased exports offsetting lower domestic crushes. Soybean exports were increased 35 million bushels to 1.185 billion bushels, reflecting record sales to China and reduced export competition from Argentina because of drought. The exports offset a reduced domestic soybean crush that USDA lowered by 10 million bushels this month because of weak domestic soybean meal demand and poor crush margins for soybean processors.

USDA also bumped up the projected price range for soybeans by 10 cents a bushel as well. The price is projected at $8.85-$9.85 a bushel for 2008-09.

While citing the drought in Argentina, USDA only slightly lowered Argentina soybean production another 0.8 ton from the February report.

In wheat, USDA projected U.S. ending stocks at 712 million bushels, up 57 million bushels from February numbers due to higher imports and lower expected domestic use and exports.

This was significantly higher than the pre-report estimate of 656 million bushels. “Wheat ending stocks jumped to 712 million bushels, putting the U.S. ending stocks to use at 32.2 percent,” said Newsom.

USDA increased wheat imports by 10 million bushels, reflecting the strong pace of imports to date. Food use for wheat is also projected to be down 25 million bushels based on the latest mill grind data from the U.S. Bureau of Census. USDA also projected wheat production 1.6 million tons higher this month to a record 684.4 million tons. Wheat production was raised in Australia with more acres and higher than expected yields. There also were upticks in production in smaller-producing countries such as Morocco, India, Mexico and Bangladesh. — DTN