Corn and Bean Stocks Higher, Wheat Lower

January 10, 2014 06:28 AM
Corn and Bean Stocks Higher, Wheat Lower

There's a lot of grain in the world, and producers have incentive to move it.

U.S. stocks of corn and soybeans have built substantially, but wheat stocks are dropping. Still, stocks of all three crops are more than adequate.

"There’s a lot of grain in the world, and growing conditions are good," says Brad Paulson of Northern Crops Marketing and Investments in Langdon, N.D. Paulson was the commentator on a post-report MGEX press call. At the same time, producers have a lot of incentive to move it.

"This grain wants to move," Paulson says. "Producers need money. Taxes are due. Machinery and land payments are due."

He recommends producers sell soybeans into any rallies, but wait to see stronger rallies in wheat and corn before letting go of supplies.

USDA’s long-awaited quarterly Grain Stocks report, released Jan. 10, provided the first snapshot of feed use of corn for the 2013-14 crop. According to USDA, corn stored in all positions on Dec. 1, 2013, totaled 10.4 billion bushels, 30% more than a year earlier. Of the total stocks, 6.38 billion bushels were stored on farms, 39% more than last year. Off-farm stocks of 4.05 billion bushels were also larger, up 17% from a year ago.

Indicated use of corn for the first quarter, September through November, of 4.32 billion bushels compares with 3.74 billion bushels during the same period last year.

"I question (the first-quarter use) number," Paulson says. "Livestock producers are using corn more efficiently. They bought corn on the way down, and demand has been good, but cattle numbers are still low. When corn prices got so high, they learned how to use corn more efficiently."

The larger-than-expected corn disappearance number drew quarterly corn stocks below the expected 10.79 billion bushels. Stocks, however, were still within the range of estimates of 10.025 billion to 11.25 billion. Last year at this time, corn stocks were much lower at 8.033 billion bushels.

USDA Agrees with Bean Estimates

Soybeans stored in all positions as Dec. 1 totaled 2.15 billion bushels, 9% more than a year ago. Soybean stocks stored on farms of 955 million bushels were 5% larger than a year ago. Off-farm stocks of 1.19 billion bushels were 13% larger. Indicated disappearance for the first quarter of the marketing year totaled 1.28 billion bushels, up 4 percent from first-quarter 2012-13.

The average trade guess for first-quarter soybean stocks was 2.161 billion bushels, with estimates ranging from 2.027 billion to 2.266 billion bushels.

Wheat Stocks Dwindle

Wheat stocks as of Dec. 1 tallied 1.46 billion bushels, down 12% from a year ago. On-farm stocks of 399 million bushels were slightly smaller than a year ago, and stocks held off farm of 1.06 billion bushels were 16% smaller than a year ago. Indicated use for the September through November period of 407 million bushels was 6% smaller than the same period a year ago when high corn prices were moving large amounts of wheat into livestock rations.

Paulson says the wheat market has been oversold. Wheat prices rallied on all three exchanges—Chicago, Minneapolis and Kansas City—after the numbers were released.

"We have a lot of competition for wheat, and the world is starting to realize that," says Paulson. Wheat can be purchased for less from other suppliers, including India, which recently sold large volumes into the world market.


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