USDA raises projected US wheat ending stocks
Beans ended with decent gains, but also finished well off the highs. Once again it was the front end that saw the biggest rises, although July added more than May due to fund money position rolling. The USDA cut 2013/14 US soybean ending stocks by 10 million bushels from last month to 135 million, which was a larger downward revision than the trade expected. They did increase US soybean imports as expected, by 30 million to 65 million bushels, but they also raised overall demand by 40 million.
China's import needs were left unchanged from last month at 69 MMT, contrary to trade expectations for a cut. Brazilian production was reduced by 1 MMT, as expected, to 87.5 MMT. Argentine production was left unchanged at 54 MMT, where some had expected an increase. The stand out point from all of this is that the USDA now has US soybean exports this season at a record 43 MMT. However the US has already shipped 40.5 MMT of soybeans and has sales of a further 4 MMT on the books waiting to go. So to make these numbers work 1.5 MMT of those outstanding sales need to get cancelled (or switched into 2014/15) AND the US makes no further sales this marketing year. That doesn't seem like a very likely scenario to me. The alternative is that the US needs to import more beans themselves.
Note too, that the US crush is estimated at 45.9 MMT, marginally below last year's levels, yet the current cumulative NOPA crush is running ahead of a year ago. World 2013/14 ending stocks were cut to 69.4 MMT from 70.6 MMT last month, which is again a larger reduction than the trade expected (the average trade guess was 70.14 MMT). Oil World estimated Brazil’s April bean exports at 5.5 MMT versus 6.23 MMT in March, saying that this would be the first time in 10 years that April's exports would be below those of March. CONAB release their April Brazilian crop estimates tomorrow morning. Also out tomorrow are the weekly export sales numbers from the USDA. The trade is expecting old crop sales of 0-100,000 MT and new crop sales of 300,000–500,000 MT. May 14 Soybeans closed at $14.95 1/4, up 12 3/4 cents; Jul 14 Soybeans closed at $14.78, up 16 1/2 cents; May 14 Soybean Meal closed at $482.10, up $4.00; May 14 Soybean Oil closed at 42.91, up 80 points.
The market ultimately closed lower, having initially made new highs just after the USDA report came out. The USDA pegged US 2013/14 corn ending stocks at 1.331 billion bushels, which was down on the 1.456 billion forecast in March and below the average trade guess of 1.403 billion. World ending stocks were placed at 158 MMT versus 158.5 MMT in March and the average trade guess of 157.7 MMT. Global corn production was however raised 6.4 MMT from last month, with a 2 MMT increase for Brazil and a 1 MMT rise for both South Africa and Russia.
The trade didn't see that one coming. The Brazilian hike was due to "favourable precipitation in March and early April has supported the developing safrinha corn crop with yields now expected just below last year’s levels in the areas where this second-season corn crop is grown," they said. The global 2013/14 corn crop is now seen at a new record near 974 MMT. China's imports were left at 5 MMT, although the USDA's own FAS in Beijing yesterday cut their forecast to 4 MMT, adding that 2014/15 Chinese corn imports would decline to 3 MMT. Currently, it won't be US corn that they are importing as there's been little progress in getting MIR 162 corn approved yet, and that is keeping US exports to China on hold. The USDA forecast US 2013/14 corn exports at 44.5 MMT, up 41.3 MMT a month ago. The US has shipped 22.8 MMT of corn so far this season, so still has a fair way to go to hit that target, even if they have got 18.5 MMT worth of outstanding sales.
Trade estimates for tomorrow's weekly export sales report are for old crop sales of 700,000–900,000 MT and new crop sales of 0-200,000 MT. Weekly ethanol production data lent no support, falling from 922k barrels/day last week to 896k barrels a day this time round. The level needed to hit the USDA's target for the season of 5 billion bushels of corn going to make ethanol in the US this year is 938k barrels/day. It's been a long time since they've achieved that. Corn planting in the Midwest is delayed, but Dr Cordonnier said that he doesn't currently see this as being a problem to "achieve near trend line yields if the summer weather cooperates." May 14 Corn closed at $5.02 1/4, down 4 3/4 cents; Jul 14 Corn closed at $5.08, down 5 cents.
The market closed lower as the USDA report lent bearish for wheat. The USDA raised projected US wheat ending stocks to 583 million bushels, which was exactly in line with the average trade guess. "Lower imports (are) more than offset by a reduction in feed and residual use," they said. US wheat exports were left unchanged at 32 MMT this season. They've shipped 25 MMT so far in a season that finishes at the end of May. The bearish surprise came from a near 3 MMT hike in world ending stocks to 186.7 MMT. The trade had been anticipating a slight cut to 183.7 MMT.
China's wheat import needs this season were revised down from 8.5 MMT to 7 MMT, with domestic feed demand there cut by 2 MMT to 23 MMT. This was the main reason behind the rise in world ending stocks. News that a Chinese government auction of 858 TMT of wheat had only received a take-up rate of 16% was hardly encouraging for wheat demand there. FranceAgriMer estimated French 2013/14 soft wheat ending stocks at 3.3 MMT versus a previous estimate of 3.2 MMT, and up 12.5% from a year ago. That was the fourth month in a row that they've increased their wheat stocks estimate, and reflects lower shipments to fellow EU countries. French corn and barley stocks were also raised, with barley coming in at 1.5 MMT versus a previous estimate of 1.4 MMT, and up 19% from a year ago.
French corn stocks were increased to 3.0 MMT versus a previous estimate of 2.9 MMT, and up 23% from a year ago. Whilst the USDA reported that only 35% of the US winter wheat crop is in good/excellent condition in it's first weekly update of the season last night, that was in line with expectations and only one point down on a year ago. Early spring plantings in Russia and Ukraine are well advanced on year ago levels. Rain would be useful, and above average precipitation is in the forecast for almost the entire region. Light rain was reported across western Ukraine yesterday, moving eastwards. For tomorrow's weekly export sales report the trade is looking for old crop sales of 250,000-375,000 MT and new crop sales of 150,000-300,000 MT. May 14 CBOT Wheat closed at $6.69, down 12 cents; May 14 KCBT Wheat closed at $7.33 1/4, down 8 1/4 cents; May 14 MGEX Wheat closed at $7.12 3/4, down 10 1/2 cents.
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