Wednesday morning’s USDA Quarterly Grain Stocks report is expected to be a yawner for the corn and soybean markets with trade prereport estimates putting Sept. 1 stocks of both grains nearly unchanged from USDA’s previous estimates of 2008-2009 ending stocks.
Trade estimates of Sept. 1 corn stocks average 1.719 billion bushels in a range from 1.665 billion to 1.803 billion bushels compared with USDA’s current 2008-2009 corn ending stocks estimate of 1.695 billion bushels and the previous year’s carryout of 1.624 billion bushels.
Trade estimates of Sept. 1 soybean stocks average 111 million bushels, only 1 million bushels above USDA’s current soybean ending stocks projection. Trade expectations for soybean stocks range from 90 million to 135 million bushels.
The average of trade estimates for corn stocks implies total corn disappearance for the fourth quarter of 2008-2009 at 2.542 billion bushels, which would be a 5.7% increase over the fourth quarter of 2007-2008.
Increases in ethanol production since spring and strong fourth quarter exports provide reason to expect better fourth quarter usage relative to last year, while liquidation in the livestock industry likely limited the rebound in usage.
The average of trade soybean stocks estimates implies total soybean disappearance for the fourth quarter was 486 million bushels, an increase of 3.2% over a year earlier.
Continued strong U.S. soybean exports in the wake of the short crop in Argentina supported quarterly soybean usage.
With the range of trade estimates narrow for both corn and soybean stocks, there may be more room for a surprise from USDA – either a bullish or bearish one.
A Sept. 1 corn stocks figure above 1.750 billion bushels should be at least moderately bearish for the corn market, while a figure below 1.650 billion bushels could draw a bullish market response.
There appears less chance that the soybean market will be surprised. USDA’s ending stocks projection is already very tight and both the old-crop crush and exports are well known at this point. Any adjustment to residual usage should be small.
Barring a major surprise from USDA, both the corn and soybean markets should continue to focus mainly on the new-crop harvest. Right now, both markets are getting very impatient for widespread harvesting to get underway as supplies are tightening up in the cash market.
Soybeans have been in tight supply for some time as evidenced by the tail-off in crushing activity at the end of the last marketing year. Gulf soybean basis bids strengthened by 20-45¢ last week with exporters struggling to line up supplies to meet upcoming shipments amid Delta harvest delays.
Nearly a month into the new marketing year, only 6% of the U.S. corn crop and 5% of the soybean crop has been harvested, behind last year’s pace of 8% harvested for both crops and the five-year average of 18%.
Based on USDA’s current crop estimates, roughly 777 million bushels of new-crop corn and 162 million bushels of soybeans had been harvested as of Sunday.
Based on USDA’s most recent usage projections, corn usage should average 1.085 billion bushels/month in 2009-2010, while soybean usage should average roughly 262 million bushels/month.
Overall corn supplies are not as tight as soybean supplies, but much of the corn that remains in the supply pipeline right now is low quality and grain merchants are badly in need of good quality new-crop supplies for blending.
The key to price action in October will be how fast the flow of new-crop supplies picks up. It figures to be a long harvest season, though, especially for the corn market.
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.