Supply/Demand Report Bearish For Grains, Soy

Friday’s USDA monthly supply/demand update held bearish news for both the corn and soybean markets as the agency raised its estimates of 2005-06 ending stocks for both commodities by more than the grain trade was expecting due to slow export demand.

On Dec. 2 USDA projected U.S. corn ending stocks at 2.419 billion bushels, up from a November projection of 2.319 billion bushels and above trade estimates averaging 2.339 billion in a range from 2.169-2.400 billion bushels.

The increase was the result of a 100-million bushel reduction in projected U.S. corn exports primarily due to increased exports from China and the Ukraine. USDA now expects U.S. corn exports for 2005-06 of 1.900 billion bushels, vs. last year’s 1.814 billion.

No changes were made in the production or domestic use projections, which was a bit disappointing as there was some anticipation that ethanol use might be increased.

USDA also raised its projection of world corn ending stocks by 4.5 million metric tons, or 3.9%, to 118.7 million tons due to an increase in estimated world production.

USDA raised its projection of U.S. soybean ending stocks to 405 million bushels, 55 million above the November projection of 350 million bushels and toward the upper end of trade expectations that averaged 386 million bushels, in a range from 337-450 million bushels.

The increase in ending stocks was solely the result of a 55-million bushel decrease in projected U.S. exports due to stronger-than-expected competition from South American exports. The USDA now sees 2005-06 soybean exports at 1.020 billion bushels, down from last year’s 1.103 billion bushels.

USDA did not change its estimate of the domestic soybean crush, but raised projected soy oil production and ending stocks sharply due to a significantly higher oil extraction rate.

The estimate of 2005-06 world soybean ending stocks was raised by 1.36 million metric tons or 2.9% to 48.11 million tons, reflecting the increase in expected U.S. stocks.

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.