Friday, April 06, 2012

April 10 USDA Report: Best Guess – Soybeans Tight, Less Cotton Acres

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USDA issues the monthly U.S. and global supply and demand estimates at 7:30 a.m. CDT on April 10. The March 30 Prospective Plantings  and quarterly Grain Stocks  reports saw September corn futures gaining nearly 18 cents and November soybeans picking up just over 53 cents last Friday, said Scott Stiles, extension economist for the University of Arkansas System Division of Agriculture.

Corn and soybean prices surged upward on a pair of USDA reports at the end of March. With the agency’s supply and demand estimates due on Tuesday, April 10, the question among analysts is: Will prices continue higher?

“Corn is a tale of two crops,” explains Stiles. 2011 “old crop projected ending stocks are considered tight at 801 million bushels. However, 2012 new crop fundamentals appear more bearish.”
The Prospective Plantings report pegged U.S. 2012 corn acres at 95.9 million, a 4 percent increase from 2011’s 91.9 million acres and the highest planted acreage since 1937.
Acreage of that magnitude combined with trend yields is expected to rebuild U.S. corn inventories to comfortable levels in excess of 1 billion bushels.

“Soybean prices have worked higher since mid-January, and are now reaching six-month highs,” Stiles said. “Continued reports of lower soybean production in South America have been the primary driver behind the uptrend.”

Last month USDA estimated Brazilian soybean production for the 2011-12 crop year at 68.5 million tons. Argentine production was estimated at 46.5 million tons.

Private analysts projections released this week estimate Brazilian soybean production between 66 and 67 million tons and Argentine production in the narrow range of 45 to 46 million tons.

Now the soybean market has added concern about lower planted acreage in the U.S. this year. On March 30, U.S. soybean acres were estimated at 73.9 million acres, a decrease of 1% from last year’s 75.0 million acres. This indicated that pre-report soybean prices had failed to buy acres from corn, as well as other competing crops.

“Most argue that U.S. soybean supplies will become extremely tight – falling below 200 million bushels — if final 2012 acreage is not higher,” Stiles said. “New crop soybean futures may attempt over the coming weeks to pull some additional acres from corn, cotton, or rice.”

 

Over the past week, that appears to be the case given the 73-cent surge in November soybeans since March 29.

Traders are also looking for USDA to lower 2011 U.S. cotton production and ending stocks. Based on ginning data, last year’s production may be reduced 130,000 bales from the March estimate of 15.67 million bales.

The April estimate for U.S. 2011-12 exports is expected to be about 290,000 bales higher than last month’s estimate of 11 million bales.

These adjustments translate into lower ending stocks. The average pre-report guess is 3.48 million bales which is 420,000 bales less than the USDA’s March projection.

Since March 30, cotton has given back about 3.3 cents, trading at 87.64, and is expected to lose more acreage to soybeans.

“Some cite the improved moisture situation in Texas as evidence we could have a bigger 2012 crop even with fewer acres planted,” Stiles said.

These adjustments translate into lower ending stocks. The average pre-report guess is 3.48 million bales which is 420,000 bales less than the USDA’s March Projection.
Average April 10 pre-report guesses for U.S. 2011-12 ending stocks:
• Soybeans: 246 million bushels vs. 275 million in March USDA report
• Corn: 721 million bushels vs. 801 million bushels in March USDA report
• Cotton: 3.48 million bales vs. 3.9 million bales in March USDA report.

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