Soybeans get a boost, but corn and wheat remain unchanged as global grain stocks tighten
USDA took another big bite out the South American soybean crop as expected, but unexpectedly increased corn production in Brazil in this month’s World Agricultural Supply and Demand Estimates (WASDE). The department left U.S. corn prices basically unchanged, but raised the 2011-12 average soybean price by 30¢ to $11.40 to $12.60 per bushel.
"The numbers were favorable to beans, but will they be a game changer that shifts a lot of acres from corn to beans in the United States? No," says Chad Hart, agricultural economist at Iowa State University.
Looking at the U.S. numbers for corn and soybeans first, traders were somewhat surprised that USDA did not lower ending stocks of either crop. The trade had been expecting higher U.S. export numbers due to the return of Chinese soybean buyers to the U.S. market. That didn’t happen. USDA left 2011-12 U.S. ending stocks of soybeans unchanged at 275 million bushels, compared to trade expectations of 260 million bushels.
Corn ending stocks for the current marketing year were unchanged as well at 801 million bushels, compared with an average trade estimate of about 781 million bushels. "U.S. stocks of corn are still tight, about 6% to 7% stocks to use," notes Hart. USDA narrowed the 2011-12 corn price by 10¢ on both sides of the range to $5.90 to $6.50 per bushel.
"The report was really a nonevent when looking at the U.S. numbers," says Randy Martinson, Progressive Ag, Fargo, N.D. Martinson was the commentator on a post-report MGEX press call in Minneapolis.
Reduced bean production in South America
Reductions in world numbers for soybeans occurred as expected. USDA lowered Brazil’s soybean production to 68.5 million metric tons versus last month's 72 million and cut Argentine soy production from 48 million metric tons to 46.5 million as expected.
USDA’s reductions in soybean production in the March WASDE report equate to a 22% drop in Paraguay, a 5% decline in Brazil, and a 3% decrease in Argentina. The overall reduction in South American bean production in the past few reports has been substantial. "USDA has probably reduced the South American crop by 12% to 15% compared to initial expectations," Hart says.
USDA left corn production in Argentina unchanged at 22 million metric tons, but increased output in Brazil by 1 million metric tons to 62 million metric tons. The trade had been expecting further downward revisions in corn production in both countries. "The increase in Brazil corn production was based on a second crop," says Hart. "Growers there can come back after beans with another corn crop. Rains have come in, which will help that crop."
USDA lowered world 2011-12 ending stocks of corn slightly to 124.53 million metric tons, down from February’s 125.35 million. World stocks of corn remain tight, down more than 13% from the 2009-10 crop when ending stocks surpassed 144 million metric tons.
World stocks of soybeans were tightened to 57.3 million metric tons, down from last month’s 60.28 million metric tons. "The world numbers on soybeans are friendly, and that will help support the soybean market," says Martinson.
USDA lowered U.S. wheat 2011-12 ending stocks by 20 million bushels. Projected food use was lowered 5 million bushels, but exports of high-quality wheat were 25 million bushels higher based on existing shipments and sales. USDA left farm prices for the current marketing year unchanged at $7.15 to $7.45 per bushel.
Global wheat supplies for 2011-12 were basically unchanged, with lower supplies in China and Bangladesh offsetting higher output in Australia.