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The May USDA reports have now come and gone and I think realistically there is only one message to carry away, which realistically should not have been shocking. World wide we have a huge stockpile of grain and soybeans (particularly beans) and with the demand locomotive running at idle, the only recourse for significant or sustained price recovery is adverse weather.
On the world estimates it is noteworthy that corn production is projected to be down 6.29 MMT primarily due to the lower production in the United States but ending stocks were only reduced by .56 MMT to 191.94, the second highest on record for a raw number and as a stock/usage ratio the second highest in the past decade. World wheat production is also projected to decline this coming crop year with the total estimate of 718.93 MMT, down 7.52 MMT. Here though, lower feed usage translates into an increase of 2.35 MMT in ending stocks to 203.32 MMT. While not a record, it would be the largest raw number since 2001 and the largest stock to usage ratio since 2012. Coarse grain production was also trimmed as the government projects a crop of 1277.31 MMT down 7.47 MMT from last year and a corresponding cut of 3.4 MMT in the ending stocks. That said at 224.41 MMT carryout, it is the second largest on record for a raw number and the fourth largest stocks/usage ratio on record.
Then we have soybeans. World production is only forecast to increase .05 MMT this coming year but that would still set a new record and according to the estimate would eventually translate to ending stocks of 96.22 MMT. To keep this in perspective, this would be an increase of 10.68 MMT over last years record number which in turn was 13.8 MMT over the previous record set in 2011. With a projected stocks usage ratio of 31.62% (new record) we have nearly 1/3 of the next years demand satisfied. I believe few would argue that the most discouraging number in any of the reports yesterday was the projected US soybean ending stock figure of 500 million bushels.
As discouraging as all of this may sound, one could make the case that we have already seen what could be one of the largest projections of the year. Certainly none of us knows exactly what the weather will hold in store but that is exactly the point; these projections assume that everything will be normal. The bean market did break fairly sharply in response yesterday but did not move outside of recent congestion ranges and corn and wheat did a nice job of stabilizing. While I would not discount the possibility of still pressing lower over the next 30 to 40 days, I suspect until we have a better handle on the conditions during pollination, it will be difficult to sustain pressure and speculative shorts could even become a bit anxious.
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