June Stocks & Seedings Analysis

Transcription

1 June Stocks & Seedings Analysis June Corn Stocks Pegged at Billion Bushels, up 977 Mil Bu from Last Year Mar-May Corn Quarterly S & D 11/12 12/13 13/14 Carryin 6,023 5,400 7,006 Imports Total Supply 6,034 5,440 7,013 Feed/Resid ,000 FSI 1,630 1,569 1,646 Exports Total Use 2,886 2,674 3,270 Stocks 3,148 2,766 3,743 ARC estimates corn stocks at 3,743 Mil Bu, up 977 Mil from the prior year and the highest since 2009/10. This is very close to the trade s average guess at 3,720 Mil Bu. But ARC also notes that there is quite a wide range of estimates heading into the report from low to high, private estimates range from 3,050-3,950 million - a heady 900 million bushel swing. The market s reaction will be exacerbated by this wide range in expectations. Indeed, not surprisingly, Stocks reports in the era of ethanol have triggered huge volatility on USDA report days. Exports were record large for the third quarter at 624 Mil, while total demand is just under the prior record set in ARC s estimate is neutral to current prices, as it reflects very limited changes in the annual balance sheet. Total Sep-May demand is pegged at 11,030 Mil Bu, up 21% from last year. This is in line with the USDA s annual demand forecast (13,635 Mil Bu, up 23% from the prior year). Still, June 1 corn stocks will rise by nearly 1 Bil Bu, which reflects the largest annual build in supplies since It s also been three years since the corn market was assured of carryover stocks of 1.0 Bil or more - recall that even in 2011, the final stocks report in September was a bearish surprise. Copyright 2013 AgResource Company. All Rights Reserved.

2 Page 2 AgResource estimates June 1st soybean stocks at 349 Mil Bu, down 86 Mil Bu or 19% from a year ago. This is below the trade s 378 million bushel average estimates. And like corn, the range in stocks estimates covers a 100 million bushel range of million with each end of the spectrum implying very different outlooks for the cash market through the rest of the year. To meet the USDA s end stocks forecast of 1,146 Mil Bu, total consumption in the final quarter of the marketing year must total at least 2,597 Mil. This implies record Jun-Aug disappearance while ARC is wary of the large amount of outstanding export sales as of mid-june. Increasingly, the market s chore will be to find even more demand by undercutting S America and Black Sea in the world export market throughout the next two crop years. If realized, it will be the first quarter in this year in which stocks fell below 2004, and would be the tightest June 1 stocks figure since Total crush and export use is estimated 622 Mil Bu, nearly 100 Mil Bu larger than a year ago, which along with 77 Mil Bu of seed use produces a drawdown in US stocks of almost 700 Mil Bu for the quarter. The year to date stocks/use ratio is estimated at a record low 11% versus 16% a year ago. June Soybean Stocks Expected to Be Lowest in Years. July WASDE Could Show Negative Annual Residual Mar-May Soybean Quarterly S & D 11/12 12/13 13/14 Carryin 1, Imports Total Supply 1,380 1,006 1,013 Crush Exports Seed Residual June 1 Stocks Tight stocks were reflected in Midwest markets through most of the quarter, as flat price bids exceeded a year ago levels. However, a top was scored in late May, and prices receded once the market was assured of slower exports and increased imports in the last quarter of the year.

3 Page 3 With crush, exports, and imports approximately known ahead of the report, the only variable left to estimate in the quarterly balance sheet is the quarterly residual use. And it s the residual component that has produced such variability in quarterly stocks reports in recent years. Market Price Reaction to June Stocks Report Since the advent of the ethanol market, and ethanol blending mandates in particularly, market reaction to major USDA reports has increased substantially. There s no real trend in how the prices react to specific reports, but notice in the following graphic the extreme volatility. ARC estimates a quarterly residual of -36 Mil Bu, meaning that we expect that the USDA stocks figure will reflect that the market has found an extra 36 Mil Bu. However, the recent break in cash prices is perhaps foreshadowing a much larger quarterly residual, implying that June 1 stocks could actually be much larger than indicated on paper. On average since 2005, Sep corn futures have changed (either up or down) by 5% on report day, which this year translates to a move in Sep futures of 20 cents. Notice also that corn futures tend to extend the move on report day through the following week. Trade estimates will be released by various news services later this week, but we note that since 1990, the average industry guess has overestimated June 1 stocks 54% of the time by an average of 16 Mil Bu. Today s US old crop cash soybean market is not showing any supply urgency.

4 Page 4 And, unfortunately, changes in Sep corn futures are weakly correlated with surprises over time. ARC suspects that on the final day of June, extended US weather forecasts typically trump stocks estimates. The same lack of correlation holds in soy price analysis. Be prepared for volatility, especially with corn and soybean stocks expectations resting in such a large range. AgResource 2014 Planted Acreage Forecast Our work suggests that higher corn seedings in the C and E Midwest will offset losses across the N Plains and far Southern region. Also, notice in the following graphic that in recent years that corn acres have changed very little from the March to June reports. Even delayed planting progress correlates poorly NASS acreage changes with corn acres in the June report in 2011 and 2013 (both delayed planting years) actually rising from the intentions report in March. USDA ARC Corn Sorghum Barley Oats All wheat Rice Soybeans Peanuts Sunflowers Canola Flaxseed Cotton Hay Dry Beans Total Crop CRP Total Area Feedgrain Oilseed ARC is general agreement with NASS s March Prospective Planting estimates which are surprisingly accurate. The June report, however, is expected to account for this year s laggard seeding pace across the Northern Plains, and also a modest shift from corn acres out of the Delta. Some minor area across the Dakotas and MN will be enrolled in the prevent plant program. Only FSA data in August will give the market some hint at the degree of prevent plant enrollment in 2014, but unlike the 8.2 Mil acres enrolled last year, a tally of less than 2 Mil acres or fewer - is expected in The June acreage report will not fully digest any acreage enrolled in FSA programs. The average trade guess on US corn acres rests at million, just a tad above the USDA s forecast and which is viewed as market neutral amid current weather forecasts. Even a final drop in corn acres to 91 Mil will do little to change the balance. It s all yield at this point.

5 Page 5 reason why acreage expansions in South America and the Black Sea will not favor soybeans and other minor oilseeds, respectively. World soybean supplies, which already are at record levels, will be rising further into ARC projects soybean acreage to increase 1 million from the March report, to 82.5 million. A more dramatic change is not expected, as, again, NASS s estimates in March are fairly well correlated with final acreage data. The average trade guess on US soybean acres rests at 82.2 million. Most notably, corn seeding ended prematurely across LA, MS and parts of AR a prime soybean producing region. Moving past specific changes in corn and soybean stocks and acreage, 2014 and likely 2015 will be the year of the oilseed. Record US and world oilseed acres will be established in 2014/15. And we see no

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