Ultra-tight soybean supplies, a new record for world ending stocks in cotton and a billion bushel boost for corn in a year added more wind to soybeans’ sails, while stealing air from cotton and corn.
Thursday was a supply/demand report double-header for USDA, issuing both an update of its U.S. and World Supply/Demand numbers for 2011-12 and releasing a highly anticipated first look at 2012-13 Supply/Demand numbers.
“At first glance, I think traders will view the report to be bearish for corn, given a record large production estimate for 2012,” said Scott Stiles, Extension economist for the University of Arkansas System Division of Agriculture. “For soybeans, the report is bullish. For cotton: bearish.“
“Opening calls have Chicago Mercantile Exchange soybeans futures 15 cents higher, corn 10 cents lower and cotton 100 points lower,” he said.
Meanwhile many analysts expect shifts in U.S. 2012 planted acres since the release of the USDA March Prospective Plantings survey.
“In particular, increases in both corn and soybean acres are expected, while reductions in rice and cotton acres are a possibility,” Stiles said. “NASS will release its Acreage report on June 29.”
Production estimates for the 2012 marketing year are based on planted acreage estimates from the March NASS Prospective Plantings survey.
Details from Thursday’s Supply/Demand reports:
SOYBEANS – The report pegged the 2011 soybean ending stocks at 210 million bushels compared to 250 million last month, in-line with analyst pre-report guesses. Soybean futures prices have rallied since mid-January on lower South American production and increased export demand from China.
“However, the most anticipated estimates were those for the 2012-13 crop year,” Stiles said. “The initial estimate for 2012-13 U.S. soybean ending stocks came in at an extremely tight 145 million bushels.”
Analysts on average expected the USDA to forecast domestic soybean inventories at 170 million bushels for the end of the 2012-13 marketing year.
Average soybean farm prices were estimated in the range of $12 to 14 for the 2012 crop compared to $12.35 for 2011.
CORN – The USDA estimate of 2011-12 corn ending stocks came in at 851 million bushels versus the average guess of 758 million. The May estimate is up 50 million bushels from April.
“Traders expected a significant rebuilding of U.S. corn supplies following the 2012 crop,” Stiles said. ‘ Based on record production of 14.8 billion bushels and a record yield of 166 bushels per acre, 2012-13 ending stocks were projected at 1.9 billion bushels.”
This 1 billion bushel year-to-year increase in inventories dampens the price outlook dramatically for the 2012 crop. The USDA currently projects the U.S. average producer price for the 2011 crop to be $6.10 per bushel. Thursday’s report projects the average price received for the 2012 crop at $4.60.
“The bottom line is that U.S. corn supplies will no longer be tight following the 2012 crop,” he said.
COTTON – For cotton, 2011 U.S. ending stocks were left unchanged at 3.4 million bales. Ending stocks for the 2012 marketing year were projected to increase to 4.9 million bales on higher 2012 production.
“With improvement in the West Texas moisture situation, the U.S. is expected to harvest 17 million bales this year,” Stiles said. ‘This would be a 1.4 million-bale production increase on 1.6 million fewer planted acres.”
Globally, cotton consumption was reduced by 1.2 million bales for 2011. World ending stocks were increased to 66.88 million bales or 900,000 bales above last month.
“There is no improvement in the cotton price outlook for 2012 given the higher U.S. and world ending stocks that USDA forecasts. World production was expected to be lower, but today’s report revealed only a modest drop of 6.35 million bales compared to last year. Total production was forecast at 116.7 million bales,” Stiles said.
World cotton ending stocks for 2012 were forecast at a new record of 73.75 million bales.
Average cotton producer prices were estimated in the range of 65 to 85 cents for the 2012 crop compared to 91 cents for 2011.
The next USDA supply-demand report will be released on June 12.