USDA Raises Its Soybean Export Forecast, But Not Enough

March 11, 2014 01:24 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 2 to 4 cents lower in old-crop contracts and mostly 1 to 4 cents higher in new-crop contracts, while wheat futures are narrowly mixed. Cattle futures and hog futures are firmer in electronic trade, with April and June hogs posting strong gains.


* USDA raises soy export forecast, but not enough... USDA acknowledge the stronger-than-forecast soybean export pace by raising its soybean export forecast 20 million bu. in yesterday's Supply & Demand Report, pushing it to 1.53 billion bushels. But as of Feb. 27, soybean export commitments (shipments + outstanding sales) totaled 1.622 billion bushels. Therefore, USDA is still too light on its export forecast or there needs to be roughly 92 million bu. of U.S. soybean sales taken off the books the last half of the 2013-14. Some cancellations are likely, but cancellations of that degree would be a record. In fact, the largest cancellations ever from March through August were 28.4 million bu. in 2011. That means this year's cancellations would have to be more than three times greater than the current record for exports to come down to USDA's forecast.

The long and short of it: Barring unprecedented cancellations, USDA is going to have to further increase its export forecast. Some of that can be countered with reduced crush and increased imports -- adjustments USDA made Monday. It's also likely residual "use" will be zeroed out when all is said and done. But it appears USDA is going to have to "find" some soybeans with an upward revision to the 2013 crop in September.

* Bearish reaction to USDA's reports. USDA's report data Monday wasn't bearish. In fact, much of the data was neutral to slightly friendly. USDA unexpectedly lowered its U.S. corn carryover projection by 25 million bu. amid an increase in exports -- traders were expecting a slight increase in carryover. For soybeans, USDA trimmed 5 million bu. off its ending stocks forecast to a tight 145 million bu., though traders were looking for a slightly greater increase. And on wheat, USDA made no changes to its supply/demand table aside from the season average cash price projection. Despite the lack of a bearish surprise, markets reacted negatively, extending the corrective losses seen Monday ahead of the reports into the close. Funds were very active sellers, dumping an estimated 14,000 contracts (70 million bu.) of corn, 12,000 contracts (60 million bu.) of soybeans and 6,000 contracts (30 million bu.) of SRW wheat.

The long and short of it: Fund money flow is the key whether Monday's sharp pullback was a temporary correction to the strong price recovery from the winter lows or whether markets have put in short-term tops and are headed for deeper pullbacks. After all, funds were a big reason why futures rallied as sharply as they did off the winter lows.


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