EHedger Afternoon Grain Commentary 2-3-2012
Feb 03, 2012
Soybeans finished strong today after some "bullish" estimates were released for South American soybean production from Informa. March beans finished 15 ½ cents higher at $12.32 ½, March corn up 1 ½ cents at $6.44 ½, and March wheat down 2 cents at $6.60 ¾.
Informa lowered Argentine corn production to 22.5 million (1.5 lower from previous estimate), Argentine bean down to 46.5 million MTs (4.5 lower from previous estimate), and finally Brazilian soy production to 70 MMTs (down 2 MMTs). They did however increase Ukrainian corn acreage which bumped up their corn production estimate by 3.5 MMTs.
The outside markets were overall supported today from "bullish" jobs data this morning. The unemployment number dropped to 8.3% which is the lowest level since Feb 2009.
We have included our estimates for Supply and Demand for this year and next in the chart below. We used the 16 year trendline yields to fill in the estimates for production purposes. These came out to be 162.2 bpa for corn, 43.5 bpa for soybeans, and 44.9 bpa for wheat. Obviously we have had weather problems the last couple of years which has resulted in below trendline yields, but we can’t rely on having weather problems this year to keep prices supported. This is one of the reasons we have used strategies to cover downside risk but still allow for upside potential.
We are projecting corn acres to be 95 million as the corn/bean ratio still supports planting corn. Between the 10.4 million acres in 2011 that were claimed preventive plant, and the 1.5 million acres coming out of crp, we think we could easily see 8 million acres added this year. We increased corn by 3 million, and winter wheat is already up 1.3 million (USDA number). That conservatively leaves room for 3.7 million to go to spring wheat, cotton, and other crops. We ended up INCREASING demand substantially in all three products and still came out with a 1.854 billion bushel carryout for corn, 0.366 for soybeans, and 0.890 for wheat.
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