Futures traders, industry analysts, crop producers, and the livestock sector will all be watching to see to what degree USDA cuts corn feeding in this month’s World Agricultural Supply and Demand Estimates (WASDE). In its previous report, USDA’s estimate for feed and residual use came in 386 million bushels above the average trade estimate, which subsequently sent corn prices spiraling lower.
"The entire focus of Wednesday’s report will be the corn feed use number," says Rich Nelson, chief strategist for Allendale, a brokerage firm in McHenry, Ill. "We expect USDA to start dropping the overstated feed use numbers."
Allendale expects USDA to lower feed and residual use for corn by 200 million to 400 million bushels following an increase in quarterly grain stocks released late last month. That will put 2012-13 ending stocks at 882 million bushels, lower than last year’s 989 million bushels but substantially higher than USDA’s March estimate of 632 million bushels. The range of estimates for 2012-13 ending stocks fall between 625 and 925 million bushels, with the average estimate at 812 million bushels.
USDA’s quarterly grain stocks released late last month showed feed and residual use down 27 percent for the December–February quarter versus the previous-year. However, grain stocks are a snapshot of a point in time, Nelson notes, and thus need to be looked at in context.
"If you look at feed use for the first-half of the year (September¬–February), it was only down 6 percent," says Nelson. "That sounds very reasonable."
USDA will also likely reduce projections for soybean feed and residual use, which will be offset in part by an increase in exports, according to Allendale’s estimates. Allendale expects the soybean carryout to come in at 139 million bushels, down from last year’s 169 million bushels but up from USDA’s previous estimate of 125 million bushels. Allendale’s estimate falls in the middle of the range of trade estimates, 107 million to 160 million bushels and is close to the average 136 million bushels.
Looking globally, Allendale anticipates USDA will lower corn production in Argentina to 26 million metric tons, down 500,000 metric tons from the previous estimate. The average trade estimate is even lower at 25.6 million metric tons. USDA will likely hold Brazil’s corn production steady at 72.5 million metric tons, according to Allendale’s estimates. However, the average estimate calls for 72.9 million metric tons, a 400,000 ton increase from USDA’s March estimate.
"There will be moderate decreases in Argentine corn and soybeans," says Nelson. "But I don’t think they will be market-moving numbers."
Allendale expects projected soybean output to be reduced by 500,000 metric tons to 51 million in Argentina, while output in Brazil remains steady at 83.5 million metric tons. The average trade estimate for corn production in Argentina is even lower at 50.5 million metric tons, with the average estimate for Brazil’s soybean output at 82.5 million metric tons.
"Brazil received rains this past week, but the skies have started to clear up," he adds.
Global carryout stocks of corn will likely increase along with U.S. stocks, says Allendale. The firm expects USDA to raise ending stocks by 3.64 million metric tons to 121.12 million metric tons, still substantially smaller than last year’s 131 million. The average trade estimate is substantially lower at 119.1 million tons.
Allendale expects world soybean stocks to fall to 60.18 million metric tons, from the previous estimate of 60.21 million. The average trade estimate calls for world carryout of 59.8 million metric tons. While projected world stocks of beans are larger than last year’s 55.25 million metric tons, they are still very tight.