Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
USDA April Supply/Demand Estimates
The bottom line in today’s supply and demand estimates for the ’07/’08 marketing year is bullish for corn, and neutral to bullish for the soybean and wheat markets.
Corn Analysis
USDA lowered the projection for ending stocks of U.S. corn by 200 million bushels from last month’s estimate, now projected at 1.283 billion bushels for the ’07/’08 marketing year. On the supply side beginning stocks, production, and imports were unchanged from last month projecting a total supply of 14.393 billion bushels. On the demand side, feed and residual use increased 200 million bushels; food, seed, and industrial use declined 95 million bushels; ethanol for fuel declined 100 million bushels for a change in domestic total use of 5 million bushels more than one month ago. U.S. corn exports were increased 50 million bushels.
Total use is now projected at 13.110 billion bushels.
World corn ending stocks, projected at 102.97 million metric tons (mmt), were down from 104.03 mmt in March.
Soybean Analysis
Ending stocks for U.S. soybeans were increased by 20 million bushels, now placed at 160 million bushels for the ’07/’08 marketing year. On the supply side, the only change from one month ago was an increase in imports of 4 million bushels for a total domestic supply projection of 3.169 billion bushels. On the demand side, USDA increased their estimate for crushings 5 million bushels; increased exports 50 million bushels; increased seed use 6 million bushels; and decreased residual use 77 million bushels from last month’s estimate. However, the residual use number might not be reliable and is to be considered suspect at this point in time. Total domestic use decreased 16 million bushels and is now placed at 3.009 billion bushels.
World soybean ending stocks projected at 49.31 mmt, up from 47.44 mmt in March.
Wheat Analysis
Ending stocks for all U.S. wheat were left unchanged at 242 million bushels. The ’07/’08 supply for all wheat in the U.S. was left unchanged at 2.613 billion bushels. Demand estimates for all wheat were increased from one month ago in two categories: feed and residual use was decreased 50 million bushels (reducing domestic total use by 50 million bushels); and wheat exports were increased by 50 million bushels. The net effect is to leave total use unchanged from one month ago estimated at 2.371 billion bushels and ending stocks unchanged. Again, the feed and residual number was increased to offset the increase in the export estimate leaving room to question this change.
World wheat ending stocks are now estimated at 112.48 mmt, up from 110.4 mmt in March.
Marketing Strategy
Viewing this report as bullish for corn and neutral to bullish for soybeans and wheat runs contrarian to popular opinion. Calling the report for corn is easy. Calling the report bullish for soybeans and wheat is taking a bit of a ‘leap of faith’. However, both soybeans and wheat have big reductions in their residual use categories. After calling those adjustments into question, it is my belief that those adjustments can not be explained.
Nevertheless, the primary trend in soybeans and wheat is currently down. The primary trend for corn is up.
Traders will be watching planting progress as the month progresses. The corn/soybean price ratio currently favors corn plantings. We could see a 3 to 4 million acre increase in U.S. corn acres planted over the March 31st Planting Intentions report. If that happens it would be extremely bullish for soybean prices. Currently, Dec ’08 corn futures are trading at $6.11 per bushel; Nov ’08 soybeans at $12.15 per bushel; and July ’08 wheat is $9.28 per bushel.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.