Corn
The USDA Supply/Demand Report this morning was considered supportive against expectations given a lower ending stocks estimate but production and yield estimates came in higher than expected. The market is called 3-5 higher on the open. Average yield was pegged at 165 bushels per acre as compared with 163.5 last month and this pushed corn production up to 13.365 billion bushels, up 120 million from last month and up about 90 million from expectations. The USDA pegged the 2009/10 corn ending stocks at 1.426 billion bushels which was about 45 million below expectations. As a result of lower beginning stocks and a jump of 100 million bushels in the export forecast, 2010/11 ending stocks are now pegged at just 1.312 billion bushels from 1.373 billion last month and 1.573 billion the previous month. This is a stocks/usage number of 9.7% which has been under 10% just two other times since 1973. World corn ending stocks were revised down by about 2 million tonnes from last month to 139.2 million tonnes. China production was left unchanged at 166 million tonnes. Of more concern could be the revision down in world coarse grain ending stocks to 172 million tonnes from 180 million last month, 187 million last year and 193.8 million two years ago. This opens the door for a revision higher in corn exports ahead as the US makes up for losses in the FSU region. Production in this region was revised down by 9.6 million tonnes.
PRICE OUTLOOK: Ending stocks are already tight and traders see the weather since August 1st as a reason to suspect that this may be the high yield estimate of the year. With the possibility of higher exports and lower production ahead, look for the uptrend to continue. With high wheat and soybean prices, look for December 2011 corn to also see a solid uptrend ahead. Look for solid support for December corn near 409 with 451 1/2 and 493 as upside objectives. Use 492 as upside objective for Dec11 corn.
Wheat
The USDA’s supply and demand and Crop Production reports were considered bullish this morning with the opening call 10-15 cents higher in wheat. US production was raised above trade expectations with the all-wheat total at 2.265 billion bushels versus 2.216 billion on the July report. Expectations were for a rise of about 15 million bushels. However, exports were raised by 200 million bushels to 1.2 billion which resulted in a drop of 141 million bushels in 2010/11 US ending stocks to 952 million. This was about 10 million bushels below expectations. The overall US wheat yield was raised by a substantial 1 bushel per acre to 46.9 bushels per acre. Hard winter and hard spring wheat ending stocks saw substantial reductions, but soft red winter (Chicago) wheat stocks were raised to 179 million bushels from 162 million in July. On the world report, all eyes were on the Russian wheat number, and the USDA lowered its estimate by a larger than expected 8 million tonnes to 45.0 million. This compares to 53.0 million in July, 61.7 million last year and 63.7 million two years ago (2008/09). Kazakhstan was lowered to 11.5 million from 14.0 in July and Ukraine was lowered to 17.0 million from 20.0 million in July. In all, the producers of the former Soviet were lowered by nearly 13 1/2 million tonnes. The EU was lowered to 137.51 million from 141.82 in July. This resulted in an overall drop in world production to 645.73 million tonnes, from 661.07 last month. World ending stocks were lowered to 174.76 from 187.05 million last month.
PRICE OUTLOOK: World ending stocks and production numbers came in about as expected but traders expect further revisions lower next month and there are already concerns for winter wheat plantings in Russia. Look for importers to continue an aggressive buying program as well which should bring a test of at least 790 and maybe 808 for December wheat. Support is near 741 and 711.
Soybeans
The USDA Supply/Demand Report this morning was considered negative against expectations as the USDA boosted production more than expected. The market is called 3-5 higher. A yield of 44 bushels per acre as compared with 42.9 last month helped push soybean production to 3.433 billion bushels, about 75 million above trade expectations. A boost in demand due to strong China imports helped keep the ending stocks news just slightly negative as exports for the coming year were adjusted to 1.435 billion bushels, up 65 million from last month. Old crop ending stocks were pegged at 160 million bushels which was about as expected and ending stocks for the 2010/11 season were pegged at 360 million bushels which was unchanged from last month and about 40 million bushels above trade expectations. World ending stocks for the 2010/11 season are pegged at 64.7 million tonnes, down about 3 million from last months estimate but still up from 63.5 million last year and 43.9 million two years ago. This is a record high. Beginning stocks were lower and production was higher but demand was revised higher by more than 3 million tonnes. The demand numbers are strong and traders will question the high yield forecast given hot weather so far in August.
PRICE OUTLOOK: The report was considered slightly negative against expectations but the market is called higher due to wheat and corn numbers. November soybean resistance begins at 1027 and 1031 with support at 1005. Use 1062 as next upside objective.
