Higher-than-expected March 1 grain stocks have traders expecting USDA to raise its estimates of U.S. corn, soybean and wheat ending stocks for 2012-2013 in the monthly supply/demand update due out Wednesday morning.
The biggest increase is expected to come in corn ending stocks after USDA reported March 1 corn stocks 386 million bushels above the average of trade estimates. Trade expectations for the 2012-2013 U.S. corn carryout average 812 million bushels in a range from 625 million to 925 million bushels, according to a Reuters News Service survey of 24 analysts. The trade expectations for ending stocks average 180 million bushels above USDA’s March forecast.
Although March 1 soybean stocks came in 64 million bushels above the average of trade estimates, expectations for the U.S. soybean carryout average 136 million bushels, up just 11 million bushels from USDA’s March forecast, ranging from 107 million to 160 million bushels.
Trade forecasts for U.S. wheat ending stocks average 727 million bushels, up 11 million from USDA’s March projection, in a range from 700-755 million bushels. USDA’s March 1 wheat stock estimate was 57 million bushels over the average of trade expectations.
Most of any increase in USDA’s corn carryout estimate is likely to be offset by a cut to feed/residual usage, although USDA could also cut corn exports further and cut corn-for-ethanol usage based on current usage rates.
While the March 1 stocks report implies lower feed/residual usage, it is also possible that USDA underestimated the 2012 corn crop and/or missed some corn with its December stocks survey. However, USDA’s National Agricultural Statistic Service will not make any revisions to its 2012 crop number for several months.
On the soybean balance sheet, USDA is likely to adjust its soybean residual use category downward, rather than cutting exports or the crush. Residual usage could be dropped to zero or even into negative territory to offset the higher-than-expected stocks. The residual category on the soybean balance sheet is basically a "fudge factor" that USDA adjusts regularly to ensure its supply/demand numbers balance.
Both soybean exports and the U.S. crush could potentially be raised, as usage in both categories remains ahead of pace to meet USDA’s current estimates. However, prospects for seasonal weakness in U.S. soybean exports due to increasing competition from South America may again cause USDA to leave its export forecast alone.
Any increase in USDA’s wheat carryout forecast will likely be at least partially offset by a reduction in projected 2012-2013 exports as export sales and shipments remain behind pace to meet USDA’s current forecast. Wheat feed/residual use could also be lowered from the current record high forecast, but indications of active wheat feeding during March should cause USDA to be cautious about changing wheat feed use.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.