Previewing Thursday's USDA Report
Jan 10, 2012
Previewing the USDA Report:
All eyes will obviously be on this week's USDA stocks report. I included a few numbers and estimates that will be discussed leading up to Thursday big release (7:30am CST).
With the extreme weather patterns and difficulty the USDA and other agencies have had the past couple of years predicting and estimating the crop, there could certainly be some surprise and adjustments coming down the pipe. Rather than trying to "predict," I urge you to try and "position" ahead of this report. Just two short years ago this exact report cost many producers a small, or in some cases, large fortune.
If you remember many of you were hoping for "bullish" numbers from this report, but that didn't happen, the numbers came out "bearish." It was early 2010 and we proceeded to break from around $4.25 to a low of around $3.25 during the next six-months. We then bounced and several analyst advised many of you to lock in sales for the next two or three years at around the $4.00 to $4.50 range. This, in turn, ended up costing many producers an absolute fortune.
My advice, just as my grandfather had always taught me, is to prepare for the worst and hope for the best. We can't blame the USDA, we have to blame ourselves if we fail to properly prepare or position ourselves. We know the difficulties involved in estimating such a large crop, and we also know the adverse weather conditions and problems that we all faced in our own fields. In fact, many of us couldn't even estimate or gauge our own yields in the fields we have farmed for the past 30 years.
I urge you this time around to be "proactive" and not "reactive" to the numbers. Have a game plan and strategy mapped out prior to the release, then follow your guidelines. The market will become extremely emotional for several days as it sorts through the numbers, it is extremely important that during this time period you stick to your guns and follow your plan. Expect the market to do the unexpected and anticipate "limit type moves in either direction. Keep in mind last year this report produced a "limit-up" move in the March corn contract. Where as in 2009 and in 2010 it produced a "limit down" move in the March corn contract.
I Hope these numbers give you a better idea about what could becoming our direction Thursday morning:
- Corn Final Crop Estimate: Most in the trade seem to be looking for the total corn crop estimate to come in around 12.26 billion, compared to the current USDA estimate of 12.310 billion and last years 12.447. The range of guesses seems to be anywhere from 12.1 to 12.4 billion
- Corn Yield Estimate: It seems like most in the trade are looking for the average yield to come in around 146.2 bushels per acre, compared to the current USDA estimate of 146.7 bushels and last years 152.8. The range of guesses seems to be between 145 and 147.5 bushels per acre. The average guess is right around 146 bushels per acre.
- Corn Ending Stocks Estimate: This is a real "wild card." I continue to hear numbers all over the board, but it seems most are going with a carryout in the mid to low 700's. I would have to guess the range is between 575 and 1 billion. The average estimate is being reported at 749. The USDA is currently estimating the carryout at 848. Many are estimating an extremely tight "stocks/usage" ratio. Some talking as tight as the 1995/96 crop year.
- Corn Feed Usage: Having been burnt several times, very few analyst even want to attempt guessing at this number. Right now the USDA is estimating it at 4.6 billion. Many feel this number is grossly overstated so anything is possible.
- Corn Exports: Currently the USDA is estimating corn exports at 1.6 billion. There is now some thought that with South American production in jeopardy the US may need to pick up the slack. Some analyst are looking for the USDA to bump exports by 100 million. I think that might be a little steep, but there is certainly the thought that it could creep higher.
- Corn Ethanol Usage: Currently the USDA is estimating usage at 5 billion. This number is expected to stay right around this level. There was some talk a few weeks back that it might slip from here, but the recent surge in production makes that tough to stomach. You have guys on both sides of the fence, but no one is looking for any significant adjustment.
- Quarterly Corn Stocks: Last year the Dec 1st quarterly stocks were reported at 10.057. This year the trade is looking for a number closer to 9.400. The range seems to be from a low of 9.200 - 9.700.
- Argentina Corn Production: The USDA is currently estimating the Argentine crop at 29 million metric tons. We all know this number is NOT going higher. The question is how low will the USDA take it this early. The trade seems to be thinking we will see the USDA drop the Argentine production number to between 23 and 25 million metric tons. I personally don't see them going much below 25 million metic tons at this juncture, choosing to cut more in February once they have some better numbers.
- Brazil Corn Production: The USDA is currently estimating Brazil's corn crop at 61 million metric tons. Similar to Argentina, we are hearing numbers all over the board. The trade seems to be looking for a 1-2 million metric ton cut in production. It wouldn't surprise me to see the USDA leave this number alone, or only slightly reduce their current estimates. I doubt they cut them below 59 million.
- Global Corn Ending Stocks: Right now the USDA is at 127.190 million tons, and most are thinking this number will come down closer to 121 million tons.
- Soybean Final Crop Estimate: This may be a little against the grain, but I am thinking the USDA may slightly reduce their total soybean production numbers. The USDA is currently estimating production at 3.046 billion compared to 3.329 billion last year. The average guess is for the number to move just a little higher, closer to 3.048. The curve ball would obviously come if they reduced the number, which is certainly possible. If it were to happen I wouldn't look for anything below 3.025 billion, but a little reduction wouldn't surprise me. The average range of guesses is between 3.01 - 3.2 billion.
- Soybean Yield Estimate: The USDA is currently at 41.3 bushels per acre compared to an average yield of 43.5 last year. The trade seems to be looking for a little bump in yield. The average guess is from a low of 41 to a high of about 42.7 bushels per acre.
- Soybean Ending Stocks Estimate: There is talk circulating in the trade that if exports don't dramatically pick-up soon we may be staring at one of the largest ending stock numbers in recent years. Right now the USDA is using a 230 ending stock number. Several analyst believe this number could eventually jump to 300+, but as of right now I just don't see it moving that high. I really doubt we move much above 250. The average guess is around 235, with the high side around 285 and the low guess down around 130.
- US Soybean Exports: I have to believe most of the trade is looking for the USDA to reduce our soybean exports by another 25-75 million bushels. Currently the USDA has our soybean exports estimated at right around 1.3 billion, some guys are thinking it should be closer to 1.2 billion, so be prepared.
- Quarterly Soybean Stocks: Last year the Dec 1st Quarterly Stocks number was reported at 2.278. This year most in the trade are looking of that number to jump towards 2.324 with a range of guesstimates form 2.220 on the low side up to 2.580 on the high side.
- Soybean Production (Argentina): The USDA is currently estimating the Argentine crop at 52 million metric tons. As with corn we all know this number is NOT going higher. The trade seems to be thinking we will see the USDA drop the Argentine soy production number to 50 million metric tons or lower.
- Soybean Production (Brazil): The USDA is currently estimating Brazil's soybean crop at 75 million metric tons. The trade seems to be looking for at least a 2-3 million metric ton cut in soybean production. There are some extreme guesses thinking that Brazil will ultimately harvest 70 million metric tons or less. I am not in that camp...at least not as of yet. Still too much time for the weather to improve to rule out the soybeans. Look at how our US soy production turned out after the extreme heat. Understand that there are definitely going to be reductions, let's just not get carried away too early.
- US Winter Wheat Acreage Estimate: Currently the USDA has total winter wheat acres estimated at 40.646 million acres. The trade seems to be thinking this number could jump higher, some are thinking it could jump by 1 million plus acres. Remember, the high insurance guarantee this year has many in the trade believing the acres certainly got planted, the question remains how much will get harvested. Most are thinking the number will jump by about 300,000 acres to 40.946. The lowest guess I have heard is around 39.5 million acres, and the highest is around 42.9 million acres.
- Hard Red Wheat Acres: The USDA is at 28.48 million acres, while most in the trade are thinking this number could jump to almost 30 million acres. The range of guesses is from 29.45 million to 31.65 million.
- Soft Red Winter Acres: Currently the USDA is estimating 8.56 million acres have been planted. The consensus seems to be that this number will be reduced by at least 1/2 million acres. The average guess is around 7.75 million acres. The high guess is around 8.6 with the low guess around 6.4 million.
- White Winter Wheat Acres: The trade is looking for a slight jump from the current USDA estimate of 3.61 million. I would have to believe the number will not exceed 4 million, but it will be slightly higher than the current USDA estimate. Form what I have been hearing the range is between 3.5 - 4 million.
- Quarterly Wheat Stocks: The USDA was at 2.150 as of September 1st. Last December we were at 1.933. From what I am hearing most in the trade are looking for the number to fall to 1.695. The high end of guesses are up around 1.9 with the lowest estimates coming in around 1.59
- Wheat Ending Stocks Estimate: Currently the USDA has ending stocks estimated at 878 million, but I am thinking we might see a slight reduction down to around 840 or 850 million. The highest estimate I have heard is up around 890 with the lowest down around 765.
- Global Wheat Ending Stocks: The USDA is currently estimating global ending stocks to be at 208.52 million tons. I am thinking they might drop this number by about 1.5 million tons to around 207 million tons.
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