USDA Supply & Demand Report Recap

USDA Supply & Demand Report Recap

Today the USDA released the highly anticipated monthly Supply & Demand report for grains, cotton, and livestock. All eyes were on the forecasted yields for the U.S. corn and soybean crops as well as harvested acreage estimates.

To no surprise, the USDA did indeed confirm smaller crops in both corn and soybeans for the U.S. However, the government agency did confirm further decreases in demand on domestic and export front for the U.S. for both corn & soybeans. Although as I have been saying for some time now, corn has been pricing itself out of the rations and export business for several months now, I do not believe that soybeans and soybean meal have done the same as evidenced by steady oilseed complex export sales.

CORN

With such a tight carryout on U.S. and world basis, it is difficult to argue that corn futures will go down to $ 6.00 anytime soon, since we have NOT even started planting in South America. Until such time, I believe that $ 7.50 - 7.70 will probably be on the bottom of the range for Dec Corn. In the meantime, in this phase of demand destruction, we like to be be bearspread corn (CZ2/ CZ3 and/ or CZ2/ CN3) for the time being. Unless, we have a disastrous planting and growing season in South America, I do not believe that $ 9.00 to $ 10.00 corn is in the cards. 2 very negative (bearish) impacts in the corn market was the reduction in Chinese imports (due to larger production estimate) and larger projected productions in Argentina and Brazil (increase of 6 mln tons vs. last month).

WHEAT

On the other hand, wheat futures took a big hit today but for unexplained reasons in my mind. Although the U.S. carryout was increased, I think that the trade mostly forgot about looking at the world balance sheet as a decrease of stocks to use ratio to 25.9 %, which is the lowest since 2008/09, decrease by 1.0 % almost from last month. This to me is bullish wheat relative to other grains, especially since Russian production is being decreased to 43.0 mln mt (from 49 mln last month). (more)