USDA's Oct. 12 crop production and supply/demand estimates contain more bullish news for U.S. wheat and corn producers, analysts say.
At a press briefing at the Chicago Board of Trade, analysts noted that although the United States is on pace to a record U.S. corn crop of 10.2 billion bushels, there is still a significant world production deficit for the coming year.
World ending stocks in corn are now pegged at 105 million tons, down from 127 million last month and 125 million last year. This, plus a decrease in U.S. ending stocks because of increases in exports and domestic usage, "is a pretty positive number across the board for the corn market," said Terry Roggensack, grain analyst with the Hightower Report.
World numbers in wheat have also been coming down significantly over the past four years. World ending stocks stand at 111 million tons, compared to 128 million tons last year, 136 million two years ago and 138 million three years ago. "Maybe the United States can see a better export market ahead because wheat exporters in Canada and Australia are bringing their production estimates down," Roggensack added.
"In wheat and corn, we are becoming the only viable stocks holder in grain for the rest of the crop year," said Dick Smetana, director of research, AgResource Co.
In fact, if you factor out wheat stocks held in the United States, "the world wheat stocks situation is tighter than it was in the boom year of 1995-96. It's because of our ability to supply and that we have the greatest logistics in the world, that the world feels comfortable.
The same is true in corn and coarse grains, especially with the sharp downturn in the Chinese corn crop (a 10-million metric ton decrease), noted Smetana.
"So while we look at our numbers and say that they are adequate, if we have any further problems in the world, it will fall on the United States for supply."
Smetana also believes that USDA perhaps underestimated feed demand for corn and soybeans in the United States, especially with production decreases in grain sorghum production and cattle on feed numbers being up as well. "We could add as much as 300 million more bushels of corn to feeding over last year. USDA has chosen to add only 200 million."
Smetana believes USDA also underestimated wheat feeding numbers. "They raised it only 25 million bushels. But I think you need to add 25-30 million bushels to that. So we could have another shoe dropping on wheat, getting the carryout down to maybe 825 to 850 million bushels."
Another positive for the corn market is that U.S. growers prefer planting soybeans over corn because of soybean's favorable loan rate.
The report also contained production increases for soybeans in both Argentina and Brazil which means a continued negative outlook in the soybean market.