U.S. soy stocks lowest in 30 years
Aug 13, 2009 3:23 PM, By Ray Nabors, Heartland Ag Network
Soybeans
Soybeans ending stock estimates are near 107 million bushels for the current crop. That is about the same as expected sales.
Malaysia produces over 90 percent of the world’s palm oil. El Niño weather conditions persist and could reduce the palm oil supplies significantly. The best substitute for palm oil is soy oil. If palm oil prices rise, soy oil prices follow. Palm oil prices increased 2.7 percent this week.
China imported 4.7 million tons of soybeans in July. The government predicts another 2 million tons will be imported during August. China has drought conditions in their northeast that are now estimated to cover three times the original geographic estimate.
United States soybean carryover stocks are estimated to be the lowest since 1977. USDA says soybean ratings are 67 percent good to excellent, 55 percent is average. Soybean bloom is 86 percent of the crop. Normally soybeans have 93 percent of the crop in bloom by this week. Pod set is below average at 55 percent. Soybean yield estimates were revised down 1 bushel from 42.6 bushels per acre to 41.7 since last month.
Production estimates dropped 50 million bushels from 3.26 billion to 3.21 billion. United States ending stock estimates were revised down 40 million bushels to 210 million. World ending stock estimates are now 50.3 million tons, down 1.5 million from the previous estimate of 51.8 million tons.
Corn
The Brazilian government bearishly estimates another million tons of corn production available for export. The crop there is better than anticipated. Egypt bought 120,000 tons of U.S. corn. China offered 2 million tons of corn for auction but sold only 726,000 tons.
Market traders sold 20,000 buy contracts during the final week of July and the first week in August. Commercial buyers began buying corn, which is usually supportive.
Export inspections of 35 million bushels were disappointingly lower than 49 million bushels inspected last week.
Traders expect corn production estimates to increase substantially. Corn condition ratings remain at 68 percent good to excellent that is 8 percent above average. Corn silking reached 89 percent this week and 24 percent is now in dough stage. Adverse weather potential decreases as the crop matures.
USDA is predicting the second largest crop on record. Yield estimates were revised upward to 159.5 bushels per acre. That increases ending stock estimates to 1.62 billion bushels, up from 1.55 billion last month. Ethanol demand is expected to increase 100 million bushels to 4.2 billion. World ending supplies were estimated at 139 million tons last month, this month they reached 141.5 million tons.
Wheat
Asia and Europe are exporting most of the wheat sold on world markets for now. Higher priced wheat from the United States is in lower demand. Total wheat sales are near 27 percent of the USDA forecast when 36 percent is average. High yields are anticipated after ample rainfall in the Wheat Belt.
World supplies are larger than average. Argentine and Canadian production estimates decreased a million tons each. Egypt has more quality problems with Russian wheat. Egypt imposed a ban on genetically modified wheat. Wheat growing areas in Asia, Europe and South America have yield-reducing weather problems.
Spring wheat conditions ratings are almost too good to be true at 72 percent good to excellent. Average spring wheat condition ratings are 58 percent good or better.
Weekly export inspections of 14.5 million bushels were just above market expectations. Exports remain below USDA projections.
USDA increased ending stock estimates for the United States to 743 million bushels from 706 million but market expectations were 750 million bushels. Production estimates increased only slightly. World production figures increased 3 million tons to 659.29 million.
Rice
Thailand offered more rice for sale last week. The offers are for stored rice or intervention stocks above the world market price. The offers have failed to glean interest and no export sales have been made. Rice exports increased 11 percent from last week.
USDA production estimates were nearly unchanged. World use estimates were revised significantly lower increasing world ending supplies. Exports are expected to decrease despite lower dollar values.
Cotton
Traders expect a correction in cotton prices because China has most of last year’s harvest in reserve.
Export demand is weak and Texas has beneficial rain with half the nation’s cotton crop under cultivation. The Delta and Southeast have declining cotton crop conditions. The lack of monsoon rain over India’s cotton growing areas is bullish, but ample rain in Texas is bearish.
Cotton did not follow the grain rally last week but remained within that 55-65 cent trading range. Traders expect a rally in cotton prices as the recession draws to a close and world economies improve.
Crop condition ratings are 50 percent good to excellent. Average is 53 percent. Trader buying will only persist if economic news remains positive.
Neutral USDA reports include slightly lower production at 13.21 million bales from 13.25 million last month. Export estimates were unchanged at 5.6 million bales. World ending stock estimates were revised down to 5.6 million bales from 6.1 million last month and 10 million a year ago.
Expect prices to rise out of that trading range and move higher as stock markets gain strength.
Closing notes
USDA says input costs and farm income reached an all-time high last season.
Higher dollar values make exported crops more expensive for importing countries. Export sales usually decline when the dollar gains value relative to other world currencies.
Chinese banks have tightened credit making less money available to import soybeans. Weather in the Corn Belt, Delta and Wheat Belt remains production favorable. Increased grain supply results in lower prices. Higher crop yields are price bearish. India predicts rainfall at 13 percent below average this season.
Lower pork prices mean smaller hog herds reducing feed demand for corn, wheat and soy-meal. Lower gasoline prices pressure ethanol prices. The national non-farm payroll increased indicating the recession may be ending. An end to recession will support higher crop prices. The USDA makes the first field survey of this crop year prior to reporting production estimates.
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