USDA’s adjustments were in the right direction, based on pre-report estimates, but the market traded lower in all the crops.
The increase in U.S. corn ending stocks was actually 30 million less than the average trade estimate based on Bloomberg’s survey of analysts, but it was still up 50 million bushels. The main reason behind the hike: The March Grain Stocks report implied poorer usage than USDA had portrayed in its March WASDE report, where it had pumped up the feed/residual category—an unusual move in that report, according to Alan Brugler of Brugler Marketing and Management. “That increase was reversed today.”
Global stocks also bounced higher—by more than 3 MMT—after USDA cut them sharply last month. On balance, this report suggests livestock operations do not need to worry about feed supplies. USDA seemingly agrees, having raised its estimates for beef production by 150 million pounds, to 24.24 billion. That’s still below last year’s total and the market can certainly absorb the added tonnage. Interestingly, the increase is expected in the second half of the year—debatable given a smaller cattle herd and presumably some heifer retention as better moisture has encouraged herd rebuilding in some areas. The only conclusion to be drawn is that USDA expects heavier weights.
Pork production also rose from the March report, from 21.12 billion pounds to 24.24 billion, with production outstripping last year in every quarter. Broiler production was left unchanged from March, at 3.8% and turkey was trimmed from 6.075 to 6.025 billion pounds, possibly due to bird flu losses. That’s still 4.7% over last year.
Jerry Gulke of the Gulke Group adds that it’s important July wheat futures remain above $5/bu. or wheat will be competing with corn in the feed bunk. “Tomorrow’s trade is probably more important than what we saw today. That $5 level needs to hold on the weekly close or wheat charts will be in trouble.”
The wheat balance sheet also saw some tweaks, but nothing terribly exciting—and stocks actually tightened compared with last year and the average trade guess. Contrary to global corn and bean ending stocks, those for wheat tightened slightly, to a 27.5% stocks/use ratio, says Brugler. At 197.21 MMT, “that’s still adequate.”
The soybean balance sheet saw quite a few adjustments, including 6 million more bushels of seed use, reflecting record planting intentions, and a 14-million bushel increase in residual use. Given the strong dollar especially against the Brazilian real, the 5 million bump in imports is not unexpected. A remaining question is whether USDA’s export figure, left unchanged at 1.79 billion, is too high, too low, or just right.
More worrisome for beans is the record loose soybean stocks in the global arena, at nearly 31%. Given that Brazilian beans are priced below US Gulf beans all the way out to October, this bodes ill for 2015 exports and prices.
The news wasn’t good for cotton, either, as ending stocks bumped up to 4.4 million—not on changes to use but on higher yield estimates (806 lb./acre instead of 795) and production, now pegged at 16.3 million bales, up from 16.08. No changes to sue led to the increase of 200,000 bales. World cotton carryout bumped higher as well, to 110.09 million.