USDA Numbers to Kick Off Tuesday Morning


by Darin Newsom, DTN Senior Analyst

OMAHA (DTN) — The December USDA and World Agricultural Supply and Demand Estimates reports usually go largely unnoticed, with market participants focusing on the holidays instead. However, this year, the numbers could get a closer look given the weather this past fall in South America and the continued slowdown in export demand for U.S. corn and wheat.


Pre-report estimates indicate U.S. corn ending stocks should increase slightly, due in large part to the continued slowdown in export demand. The average estimate showed an increase of 19 million bushels to 666 mb, though given the lackluster performance of exports, the number could come in closer to the high side of estimates at 752 mb. Feed and ethanol demand should be left unchanged, with little reason for adjustment at this time.

Globally, the interest will be on South America's expected production. With rains hampering Argentine planting through November, production there could be whittled back from last month's projected 28 million metric tons. If so, look for global ending stocks to be trimmed slightly as well.


U.S. ending stocks of soybeans are expected to decrease from the November estimate of 140 mb to 135 mb. If so, it will likely be due to increased domestic crush demand, while exports remain unchanged at 1.345 billion bushels. While the argument could be made that the current strong pace of exports could lead to an increased demand projection, the U.S. is on pace to fulfill the November projection by the end of March when South American new-crop supplies are expected to be available.

Speaking of South America, it is possible that the record production projection of 81 mmt in Brazil could be bumped up a bit given good conditions across the heart of the growing area in November. This could offset the expected slight decrease in U.S. stocks, leaving global ending stocks near unchanged at 60 mmt.


Domestically, wheat ending stocks are expected to increase slightly due to the continued slow pace of export demand. Through the first half of the 2012-2013 marketing year, shipments for all wheat are running 9{8a1275384cb93b18aa3d41af404144e37302a793dec468d70d54c97b65cfac05} behind the average pace and, if continued through the end of the year, would indicate a decrease in demand of 110 mb.

Globally, ending stocks could also increase slightly, possibly climbing back above the 175 mmt level. Only minor, if any, changes are expected in global production estimates.


Over the course of November, the forward curve (futures spreads from the March 2013 contract to the May 2013 contract) grew less bullish. This would indicate that the idea of a minor increase in domestic ending stocks may have been factored into the market, though possibly a larger change than what the pre-report estimate is indicating.

Soybean futures spreads saw a sharp downtrend during the month of November, reflecting a solid weakening of the inverse in the forward curve. This indicates commercial traders held a far less bullish view at the end of the month as compared to what was seen in mid-July, possibly due to the growing conditions in Brazil and ideas that corn acres lost in Argentina could switch to soybeans. If this is the case, global ending stocks could come in larger than expected.

The carry in the Chicago March 2013 to May 2013 wheat spread strengthened again in November, indicating a more bearish market view of supply and demand. The minor increase in domestic, and possibly global ending stocks, would seem to be in line with this view, though average estimates could be slightly understated.

© Copyright 2012 DTN/The Progressive Farmer. All rights reserved.

Posted with DTN Permission by Haylie Shipp



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