Pre-report estimates for USDA’s November round of numbers came in slightly larger than what was seen in October.
USDA will release its Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CST Tuesday.
Domestic ending stocks of corn are expected to grow by 25 million bushels to 1.587 billion bushels. This includes an expected 1 mb increase in production and implies a 24 mb (or so) decrease in demand. If this occurs, it will likely be seen in exports given that through the first nine weeks of the marketing year, total shipments are running 5 percentage points behind average (percent shipped of USDA’s marketing year projection).
Realistically, exports could be trimmed 25 mb to 30 mb, the latter hinting at a possible 5 mb increase in feed demand. Ethanol demand should stay unchanged at 5.25 bb. Globally, ending stocks are expected to increase by 1 million metric tons, though still staying well below the 196.0 mmt from 2014-2015. It’s possible Brazilian production could be bumped up another 1 mmt, mirroring its October climb to 80 mmt from September’s WASDE estimate of 79 mmt. China’s estimated production of 225 mmt should remain unchanged, wrapped in mystery as always.
The market itself continues to show a neutral view of long-term fundamentals, with the carry in the market’s forward curve (series of futures spreads from the December 2015 contract through the July 2016 contract) covering approximately 47% of the total cost of carry. A bearish reading would be 67% or greater, while the bullish range is 33% or less.
Historically (based on USDA’s fiascos of the last two marketing years), domestic ending stocks increase in the November report before USDA returns to the trend of month-by-month decreases through the following September Quarterly Stocks figure. Therefore, and for no particular fundamental reason, the average pre-report estimate of a 4 mb increase from October’s 424 mb to 429 mb seems likely.
These same estimates are looking for a 24 mb increase in production, based on a slight increase in average yield to 47.5 bpa, meaning demand could also increase by 20 mb. If so, the most logical category would be exports, with the first nine weeks of shipment data showing demand running 7% ahead of last year compared to USDA’s October prediction of a 9% decrease. Globally, ending stocks are expected to stay unchanged at 85.1 mmt, also hinting at a slight increase in demand (if U.S. production sees a slight bump).
The weak carry in the market’s forward curve (January 2016 contract through the July 2016 issue) continues to indicate a bullish view of supply and demand. However, this price relationship has been in place for years and continues to generate much noncommercial buying interest.
Believe it or not, there could actually be a fair amount of interest in USDA’s November grain sorghum numbers. The average pre-report estimate for production came in at 575 mb, up slightly from October’s 574 mb and resulting in a like increase in ending stocks (43 mb as compared to last month’s 42 mb). The key to the market could be demand, particularly exports, which held steady in October at 430 mb. The market will keep a close eye on basis bids, with growing ground piles showing large post-harvest supplies that will need to move.
There isn’t much expected of the November USDA reports when it comes to wheat. The average pre-report estimate for domestic ending stocks came in at 866 mb, up 5 mb from September, while global ending stocks were expected to decrease by 0.6 mmt. This would imply an increase in global demand, though no corresponding bump in U.S. exports. Through 22 weeks of the 2015-2016 marketing year, total wheat shipments are running 9 percentage points behind the three-year average (shipments as a percent of USDA’s projected demand) and 18% behind last year’s anemic pace. By comparison, USDA’s October estimate of 850 mb was little changed from 2014-2015 demand estimated at 854 mb.
|U.S. CROP PRODUCTION (Million Bushels) 2015-16|
|U.S. AVERAGE YIELD (Bushels Per Acre) 2015-16|
|U.S. Harvested Acres (Million) 2015-16|
|U.S. ENDING STOCKS (Million Bushels) 2015-16|
|WORLD ENDING STOCKS (Million Metric Tons) 2015-16|
|WORLD PRODUCTION (Million Metric Tons)|
|European Union wheat||155.3||156.5|