Old-crop soybean and corn stocks keep tightening while new-crop prospects point to a huge increase in corn production and another tight year for the soybean market.
Analysts seem to agree on those general expectations, but traders may not be ready yet for the the next USDA report on supply and demand.
"I expect short covering head of the report for corn and wheat," said Darrell Holaday, analyst at Country Futures, Frankfort, Kan. He expects traders to unwind soybean/corn and soybean/wheat spreads. "Sometime, we will see bean liquidation."
USDA's May 10 World Agricultural Supply and Demand Estimates report will update the numbers for use and carryover of supplies from the 2011 crops, and it will provide projections for the 2012-2013 marketing year.
Old-crop soybean demand appears to be more than USDA thought last month when it projected ending stocks of 250 million bushels. Bloomberg found an average old-crop carryover estimate of 215 million bushels in a survey of 24 analysts. Country Hedging, a subsidiary of CHS Inc. based at Inver Grove Heights, Minn., came up with the same number.
Country Hedging raise its estimate of soybean exports from last month and noted the possibility of an increase in crush to fill stronger meal export demand that resulted from drought damage to Argentina's crop.
Corn supplies from the 2011 crop likely will slip to around 765 million bushels, compared with USDA's April estimate of 801 million. Ethanol production has eased off this spring from heavy volume early in the marketing year, but the season's volume still is likely to be more than last months' USDA estimate of 5 billion bushels. China's recent buying spree was mostly for new-crop corn.
For the 2012-13 projections, analysts expect USDA to use acreage estimates from the March Planting Intentions report. Department analysts usually adjust projected yields for the May report based on early planting progress. Analysts say this year's early planting is likely to increase projected yield by 1.3% above trend.
"The concern everyone has in the corn market is with the fast planting pace," said Holaday. As of May 29, 53% of the U.S. crop had been planted, compared with the five-year average of 27%. USDA's past estimates suggest it will use a yield of about 166 bu./acre. On intended planting of 95.9 million acres, that yield would produce a crop of around 14.6 billion bushels. Bloomberg's survey pegged the average corn crop estimate from 24 analysts at 14.4 billion bushels.
"It's going to be pretty interesting to see how they handle the new-crop corn demand," said Tim Emslie, research director at Country Hedging. USDA analysts could adjust prospective demand from their previous estimates because of the big crop, or they could project a carryover around 2 billion bushels. USDA also has already said it expects an early harvest and strong old-crop prices to pull some of the new crop into the old-crop year.
Soybeans Stay Tight
USDA's May 10 projections for 2012-13 soybean supply and demand also are expected to use March acreage figures with trend yields. Based on those numbers, Allendale, Inc., McHenry, Ill., projects a crop of 3.2 billion bushels and ending stocks of only 132 million bushels next year. Bloomberg found that analysts on average expect next year's carryover projection to reach 172 million bushels.
Even though USDA's May 10 supply-demand estimates are expected to show another year of tight soybean fundamentals and a surge in corn supplies, analysts expect USDA to increase estimated acreage later in the year. In response to the surge in soybean prices since the March plantings report, analysts expect actual planted soybean acreage to climb at least 1 million acres.
Holaday noted that Informa Economics projected this year's corn plantings slightly higher than USDA's March report at 96.1 million acres, but pegged soybean planting sat 75.8 million acres – 1.9 million more than USDA projected in March.
"The market is doing what it must," he said. "It's bought a ton of acres."
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AgWeb will have full coverage of the May 10 reports, following their 7:30 a.m. CDT release.