Stocks of corn and soybeans remain extremely tight but corn stocks are nowhere near as tight as expected, according to USDA’s quarterly Grain Stocks report released March 28.
Corn stocks as of March 1, 2013, were 5.4 billion bushels, 387 million bushels larger than the average trade estimate of 5.013 billion bushels. While corn stocks are 16% smaller than a year ago and the lowest since 2004, larger-than expected corn stocks means demand has softened.
Since December 1, 2012, corn stocks declined 2.63 billion bushels. A year ago, December-February corn stocks fell 3.62 billion bushels. Feed and residual use for the recent quarter was historically low, says Brian Basting of Advance Trading, Bloomington, Illinois. Basting was the commentator on an MGEX press briefing following the release of the report.
"We’ve seen a dramatic decrease in corn usage year to year," says Chad Hart, agricultural economist with Iowa State University. Demand from the ethanol sector fell 2%, feed and residual use dropped 13%, and corn exports fell 55% due to recent high prices.
"The report is bearish corn, at least for old-crop," says Hart. "Stocks are still tight, just not as tight as we expected." May and July corn futures plummeted their 40-cent limits following the release of the report.
The corn-wheat link
All wheat stocks as of March 1 were just over 2% higher than year-ago levels at 1.23 billion bushels, according to the Grain Stocks report. Wheat stocks as of March 1 fell 16% from December 1 levels of 1.66 billion bushels. Still just like with corn, quarterly wheat stocks were significantly higher than the average pre-report trade estimate of 1.177 billion bushels due to lower feed use.
"What we are hearing since March 1, is that quite a bit of wheat is being considered and committed into feed rations because of the price advantage to corn. We could start to see tremendous feeding of wheat," says Basting.
Corn and wheat prices have been linked and will continue to be linked, and prices favor feeding of wheat when possible, notes Basting. "Weather permitting, we have the potential to rebuild stocks, particularly for corn and that could weigh on wheat prices as well," he adds. Old-crop wheat futures sank following the report.
Soybean stocks were also stronger than expected at 999 million bushels, compared with the average trade estimate of 935 million bushels. Still quarterly stocks as of March 1 are well below last year’s 1.374 billion bushels. Since December 1, soybean stocks have fallen 28%. Even so, weaker than expected demand for soybeans sent old-cop futures plunging in the wake of the stocks report.
March 28 Prospective Plantings, Grain Stocks Reports
See all of the report data, coverage and analysis of USDA's March 28 Prospective Plantings and Grain Stocks reports.