“Quiet” Report Could be Bullish for Grains


With so few numbers, the February USDA supply-and-demand report often suffers from middle-child syndrome, falling in between the hullabaloo that is the January reports and the highly anticipated Prospective Plantings report at the end of March. This year could be more of the same, though a bit more interest than usual could be paid to the report, due to pre-report estimates of decreased ending stocks all the way around.

USDA will release its latest Crop Production and World Agricultural Supply-and-Demand Estimates (WASDE) reports at 7:30 a.m. CST Wednesday.


Starting with corn, domestic ending stocks are expected to drop to 736 million bushels, possibly dropping the ending stocks-to-use ratio to just under the 5.5 percent calculated in January. Globally, the expected decrease in U.S. ending stocks and a possible decrease in Argentine production could trim ending stocks to near 125 million metric tons, putting ending stocks to use to under 15 percent, still the tightest on record since the 1973-74 marketing year.


Domestic soybean ending stocks are estimated to drop 5 mb to 135 mb. If so, this could put ending stocks to use at about 4 percent, still the tightest on record. Globally, Argentina production is expected to decrease again with Brazil possibly remaining unchanged at 67.5 mmt. If so, ending stocks could possibly slide to 58 mmt with a projected ending stocks-to-use ratio of 22.6 percent.


The wheat situation could also be more interesting than usual for a February report. Domestic ending stocks are expected to decline slightly to 810 mb, most likely due to increased export demand projections. If so, ending stocks to use could dip to 32.6 percent, still not an exceptionally tight supply and demand situation (this is a higher domestic ending stocks-to-use figure than those seen from the 2002-2003 marketing year through the 2008-2009 marketing year).

Globally, ending stocks could be trimmed to 175 mmt if cuts to the Argentina and Australian crops are seen. This could lead to a world ending stocks-to-use ratio near 26.3 percent, again not an overly tight supply-and-demand situation on face value. The question will remain how many of those stocks are of higher quality, a factor that could have more influence later in the marketing year.


Overall, the reports are expected to be mildly bullish. However, much of this may have already been built into the market with the recent rally in all three grains.

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Posted with DTN Permission by Haylie Shipp


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