Projected corn ending stocks less than expected

Jul 29, 2011
by DTN

The July USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports put corn ending stocks below trade expectations, allowing the corn market to recover from recent losses.

The July USDA Crop Production and WASDE reports should set off fewer fireworks than we saw following the June 30 quarterly stocks and planted acreage reports.

Traders were most interested in what USDA economists would do in the 2010 corn crop balance sheet, given the June quarterly stocks estimate for corn, which was 368 million bushels (mb) above the average pre-report estimate. Small adjustments were made in several categories, leading to an increase in ending stocks from the June report’s 730 mb to 880 mb.

At 880 mb, corn ending stocks rose less than the trade’s average estimate of 905 mb. This puts the ending stocks-to-use ratio at 6.6 percent versus 5.4 percent in June. USDA pegged corn feed and residual use at 5 billion bushels (bb); food/seed/industrial at 6.43 bb, with the ethanol component at 5.05 bb; and exports 1.875 bb.

Soybean ending stocks are pegged at 200 mb. This increased the U.S. ending stocks-to-use ratio to about 6.1 percent.

DTN Analyst John Sanow noted that the July look at new-crop ending stocks will probably be dropped in the recycle bin about as quickly as it was released given the re-survey of acreage, in the northern Plains.

Corn ending stocks were pegged at 870 mb, below the trade’s expected 994 mb but above the June figure of 695 mb. USDA’s national season-average price range was lowered from $6-$7 in June to $5.50-$6.50.

Soybean ending stocks dropped as expected, to 175 mb. That is a more modest reduction than the trade’s average 169 mb target. The ending stocks-to-use ratio now is 5.4 percent. Though the season-average price was lowered $1 at each end of the range, projected at $12 to $14, it is still a record level.

“The report for beans should be considered neutral-to-bearish, as old-crop ending stocks climbed 20 mb above June due to another decrease in exports while new-crop stocks fell less than expected to 175 mb,” Sanow said.

World ending stocks should be viewed as bearish for corn and neutral for beans, Sanow said.

Corn ending stocks jumped in both marketing years: old-crop rose from 117.44 million metric tons (mmt) in June to 120.88 in July and new-crop, from 111.89 to 115.66. While USDA increased China’s 2011 imports by 1.5 mmt to 2 mmt, that is well below some trade expectations.

“As expected, world stocks for corn rose to a more comfortable level in both marketing years. New-crop stocks fell when traders thought an increase was looming.

Old-crop soybean stocks increased from 64.53 mmt to 65.88 while new-crop beans inched higher, from 61.59 mmt to 61.97 mmt.

“In beans, only slight increases were seen, keeping the global picture at a comfortable level,” Sanow said.