On the surface, Friday’s World Agriculture Supply and Demand Estimate (WASDE) report didn’t change much. An already tight supply of worldwide grain stocks didn't get any more constrained, but many grain analysts believe the true story will be revealed in next month's report.
"It was about what everybody expected," says Jerry Gulke
, president of the Gulke Group
. "I think we all hoped for somebody to come in here and tell us that the government is going to acknowledge that China bought corn from Argentina and lower world stock. But that didn’t happen. The only thing that was a little bit positive perhaps was soybeans, but we’ve got the Chinese now putting the squeeze on crushers. So what that did was there was a lot of hoarding going on and some processors may have bought 60 days worth of stocks and now they only need 30 days. I think in the long run this report didn’t change much."
Gulke questions where stocks really are and how USDA is keeping worldwide supplies so high. They are calling the Chinese corn crop the third largest ever, despite well documented weather problems there this year and new-found Chinese demand for U.S. corn. Argentina and Brazil’s stocks are still listed relatively high for those countries. They had problems, too. "The people we talk to down there think it’s down 1or 2 million tons.
"Then you get into soybeans and the Brazilian crop is still at 67.5 million tons. World stocks has dropped to 60 million, I’m not sure where they get that. If the world stocks are 60 million, and that’s down a little bit, and if you look at the implications of the weather we had in Brazil and Argentina, the respected that look at that stuff say we’re about 5 million MT down from last year. So if that’s right, then we’re probably about 55 million MT in worldwide carryover. It will be an interesting year going forward."
Rumors circulated Friday morning that the Chinese are still looking
to buy more soybean oil. Rumors persist that they will buy more corn yet this year, Gulke says.
International ag banking behemoth Rabobank
also questions the numbers. A memo written by its research department after Friday’s report was titles "USDA Holds Punches(‘til January)" It says "The USDA were stuck between a rock and hard place coming into this report, after ABARE (the Australian government’s official forecaster) surprisingly lifted its national wheat production estimate by a further 1.7 million tonnes to a record 26.8 million tonnes earlier this week. While recentanecdotal evidence had strongly indicated lower production since the USDA’s November estimate of 24 million tonnes, the USDA today lifted its forecast to 25.5 million tonnes." For their part, Rabobank didn’t pull any punches with their analysis. The memo plainly states they believe both numbers are too high.
Furthermore, Gulke says there was conjecture on the trading floor Friday morning that high-quality premium wheat exporters are oversold on their needs. He likens this to the news this summer from Russia. They had committed to sell significant amounts of wheat to Egypt and then reneged on those promises when drought devastated the crop and prices started moving significantly higher. "I did dig into the wheat classes and USDA did lower the ending stocks for spring wheat by 10%. A pretty big move I’d say. If you want to see something exciting take a look at the Minneapolis wheat charts lately. It’s been breaking out to the upside. There’s a lot spreading lately where people are buying the Minneapolis and Kansas City wheat and selling Chicago."
The world is taking note of this wheat news. In France, Gulke says the wheat market gained $2.00/bu. this week. "You almost have to look outside of our country to see what’s really going on."
Going forward, Gulke says this report probably didn’t do much to change the markets. The trading floor concerns are that there will be a very bullish report in January that shows demand hasn’t been curbed this fall when prices skyrocketed.