Friday morning’s monthly USDA supply/demand update may be largely neutral for corn and soybean prices as USDA’s U.S. carryout estimates for both crops were at or below the average of trade expectations.
The corn market may find mild support from a smaller estimate of world corn ending stocks, but a significant increase in the projected world soybean carryout may offset the impact of from of a supportive U.S. soybean ending stocks number.
As expected, USDA raised its estimate of the 2009-2010 U.S. corn carryout reflecting larger production.
USDA pegged 2009-2010 U.S. corn ending stocks at 1.672 billion bushels, up from its September estimate of 1.635 billion bushels, but in line with trade estimates averaging 1.675 billion bushels in a range from 1.448 -1.827 billion.
Despite increased U.S. corn production and ending stocks, USDA cut its estimate of world corn ending stocks by 2.8 million metric tons (mmt), or 2%, to 136.3 mmt, largely reflecting a 5-mmt decrease in China’s expected crop, which is now pegged at 155 million tons.
The decrease in Chinese production was not a big surprise as recent private estimates out of China have been even lower and the U.S. Feed Grains Council recently pegged China's crop at only 148.8 million bushels.
A 63-million-bushel increase in projected U.S. corn production was partially offset by a 5-million-bushel increase in projected 2009-2010 usage and a 21-million-bushel drop in beginning stocks as indicated by last week’s Quarterly Grain Stocks Report.
The new U.S. carryout estimate is only 2 million bushels smaller than last year’s revised carryout.
USDA raised projected corn feed/residual usage by 50 million bushels based simply on the larger crop size and raised projected feed/seed/industrial use by 5 million bushels, reflecting expectations for greater corn sweetener production due to tight sugar supplies.
However, projected U.S. corn exports were cut by 50 million bushels due to larger feed grain supplies in Canada and expectations for large world wheat supplies to boost competition for corn exports.
USDA left the projected range for the 2009-2010 on-farm average price of corn unchanged at $3.05-3.65/bu. despite the increase in ending stocks.
USDA raised its U.S. soybean carryout estimate for 2009-2010 by only 10 million bushels to 230 million bushels, compared with trade estimates averaging 257 million bushels in a range from 200 million to 333 million bushels.
Total soybean supplies for 2009-2010 rose by 33 million bushels, reflecting an increase of 5 million bushels in 2009 soybean production and an increase of 28 million bushels in beginning stocks as indicated by the Quarterly Grain Stocks Report.
Most of the increase in supplies was offset by larger usage projections, however, with USDA raising projected U.S. soybean exports by 25 million bushels to reflect increased supplies, lower prices and increases in global demand, primarily for China.
USDA lowered its projected range for the 2009-2010 average on-farm price of soybeans by 10¢ on both ends to $8-10.
USDA raised its estimate of world soybean ending stocks by 4.26 mmt, or 8.4%, largely reflecting increased production expectations for the U.S., Argentina and Paraguay, which was only partially offset by a reduction in China’s crop size.
Argentina’s projected soybean crop was raised by 1.5 mmt to 52.5 mmt, while China’s crop was cut by 500,000 tons to 14.5 mmt.
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.