Final U.S. corn and soybean acreage and yield have no where to go but down after USDA's June 12 crop production report and supply/demand estimates. This could be the basis for a bull market this summer. Meanwhile, U.S. wheat ending stocks are falling, but so are exports.
USDA projected lower wheat ending stocks from last month and last year, a good sign. On the other hand, the export forecast dropped from 1.1 billion bushels to 1.065 billion bushels for old crop. New crop data projects only 1 billion bushels in exports.
“Those are the kinds of adjustments you make when prices are too high for export, but we're at contract lows,” said grain analyst Terry Roggensack. “One reason could be the very strong U.S. dollar.”
Normally, the fact that Chinese wheat production dropped significantly and imports were revised higher in the report would be positive news. “But their huge stock numbers are buffering the impact of the world numbers.”
Roggensack believes a bull market could be setting up for later this summer in the U.S. grain markets with weather problems and/or prevented plantings.
“USDA is still using the second-highest yield in history for soybeans, 39.5 bushels and a harvested acreage of 79.6 million acres. If we end up with a harvested acres number of 76 million acres and we use a yield of 37 bushels, we end up with a carryout of 265 million bushels. Those are the kind of tight numbers that can provide for some increased volatility to the upside this summer, especially if we have threatening weather develop.”
Roggensack noted that weekly crop progress reports are still showing plenty of soybean acres that have not been planted or replanted, maybe as much as 2 million acres. “In Iowa, only 81 percent of the crop is planted in soybeans. So we have a developing problem in getting these crops in the ground and achieving these estimated trend yields.”
A similar situation exists for corn where yields and planted acreage were not changed in USDA's forecast. “If we drop planted acreage by 1 million to 2 million acres (in coming reports), which is pretty much expected by the market, and have yield problems which drop the expected yield to 134 bushels, we end up with a carryout of around 1.6 billion bushels and more interesting grain market for the summer. Corn could be the leader.”
More on the report:
USDA forecast winter wheat production at 1.32 billion bushels, down 2 percent from the May 1 forecast and 15 percent below 2000 to the lowest level since 1978. Based on June 1 conditions, the U.S. yield is forecast at 41.2 bushels per acre, down 0.6 bushel from the last forecast. Grain area totals 32.1 million acres, unchanged from May 1.
Ending stocks for new crop soybeans are now projected at 440 million bushels, compared to 500 million last month. The lower ending stocks figure for soybeans is the result of increases in exports to a record high 995 million bushels. Crush is also at a record high 1.645 billion bushels.
Projected 2001/02 ending stocks of corn are down 25 million bushels from last month as larger exports more than offset the increased beginning stocks. Projected exports are up 75 million bushels due to reduced competition.
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