USDA hit U.S. wheat with a major surprise in its Oct. 9 World Agricultural Supply and Demand Estimates, increasing projected U.S. ending stocks for wheat to 864 million bushels. That was a 121 million-bushel increase over the previous month.
“Wheat ending stocks haven’t been that high since 2001,” said Joe Victor, vice president, Allendale, speaking at a Minneapolis Grain Exchange press briefing on the USDA report.
“More concerning is the stocks-to-use ratio,” Victor said. “Last month, we were at 33.5 percent. According to this report, we are now at 40.6 percent. You’d have to go back to 1987 to find higher stocks-to-use at 47 percent.”
Global wheat usage does temper the U.S. numbers somewhat, Victor noted. “As long as wheat is being used globally, we can find some support (for prices). The stocks-to-use ratio globally is now at 24.15 percent. So there is some usage out there, but it’s just not coming to the United States.”
USDA dropped projected domestic feed use for wheat by 45 million bushels and U.S. exports by 15 million bushels. “We were not surprised by the drop in exports because of the poor start we’ve had in exports. But when you see the end stocks increase on hard winter, hard spring and soft red, along with the reduced exports and feed use, wheat is the most abysmal out of the three major crops, even when you add in the reduced harvested acres.”
USDA dropped its estimate of the season average farm price on wheat from $5.10 a bushel to $4.85 a bushel. USDA also adjusted harvested acres for wheat, dropping them by 300,000 acres.
Victor says early returns on harvests indicate stronger than anticipated yields for both corn and soybeans. “However, as much at 100 million bushels of corn could be lost due to a frost/freeze.”
Corn production, estimated by USDA at 13 billion bushels, is near the record set in 2007 of 13.38 billion bushels. USDA adjusted harvested acres for corn, dropping them by 700,000 acres. The corn stocks-to-use ratio is projected at 12.8 percent, versus 12.6 percent last month. Yield, projected at 164.2 bushels, would be a new record, a significant increase over the previous high of 160.3 bushels in 2004.
USDA is neutral on their season average farm price for corn, at $3.35. “Globally, we’re looking at a 15 percent stocks-to-use ratio versus 15.7 percent last month. USDA increased feed use for corn, and there is some optimism in the poultry market.”
Ethanol use was unchanged from last month. “We’re going to need 4.2 billion to 4.25 billion bushels of corn to meet the EPA mandate for ethanol production this calendar year. Profitability has returned to the sector,” Victor said.
USDA’s estimated 3.25-billion-bushel soybean crop would surpass the old record of 3.197 billion bushels set in 2006. Yield, at 42.4 bushels per acre, is up a tenth of a bushel from the previous month, but is still below the 2005 record of 43.1 bushels per acre.
Projected U.S. stocks-to-use for soybeans was increased to 7.2 percent while global stocks-to-use was raised to 17.7 percent, “primarily due to increases in production for Argentina, which is planting enough soybeans to produce a 52.5 million metric ton crop, which would be a record,” Victor said.
USDA also dropped 2009 U.S. soybean harvested acres by 400,000 acres and lowered the season average farm price by 10 cents to $9 per bushel.
No loss from a frost/freeze is expected in the soybean crop, according to Victor. “However, as much as 2 million to 5 million bushels could be lost in the Delta region because of heavy rains, where mold and beans popping out of their pods are going to create some field loss.
“The other big outside influence we’ve seen in October are the index funds,” Victor said. “The long-only funds have been major buyers this week (early October), steadily building or adding to long positions since January 2009.”