Market Eyes USDA Feed Usage In Monday's Report
Mike McGinnis01/09/2015 @ 11:22am
How much grain sits in private and commercial storage, as of December 1, 2014? And, how much corn has been used for feed in the first quarter of the 2014/15 fiscal year? Those seem to be the main questions the market wants answered in next Monday’s USDA Grain Stocks Report.
Aside from updated stocks data, and feed usage with Supply/Demand figures, the USDA will release its final estimate of U.S. 2014 crop production, and U.S. Winter Wheat Seedings on Monday at 11:00am CT.
So, there will be a lot of numbers for the market to chew on. Let’s dive into the pre-report estimates.
The Quarterly Grain Stocks Report is expected to show soybean stocks at 2.608 billion bushels, wheat stocks at 1.501 billion bushels and corn stocks at 11.161 billion.
CORN USAGE; A REPORT DRIVER
The corn-for-feed usage data will be reported within the USDA’s total corn usage estimate (food, feed, and residual). The implied first quarter usage from the Grain Stocks report, Sep - Nov, is seen at a record 4.500 billion bushels, according to Allendale, Inc.’s latest estimate.
However, because cattle herd numbers remain at record-low levels, and hog numbers remain in a building stage, this year’s corn for feed usage number is expected to be calm, according to Don Roose, President of U.S. Commodities, Inc.
“If you remember last year, the USDA pushed up corn feed use up 450 million bushels, a lot higher than the trade had expected. As far back as 2000, corn feed usage was only raised that much one time and that was in 2006. Usually, the feed use doesn’t change that much,” Roose says.
Also, it’s interesting to note that AgResource, a private analyst firm, stated in its Friday letter to customers that, “the market is unwilling to push March corn below its 50-day moving average, until first quarter feed use is known.”
The next category of the USDA Report that will be highly watched will be the final 2014 U.S. harvested acreage.
HARVESTED ACREAGE
The consensus is that Monday’s report will show a drop of 500,000 corn harvested acres, compared to the government’s December estimate of 83.0 million. The average analysts estimates for corn harvested acreage ranges from 82.1-83.3 million.
“So, the market would get a surprise if the harvested acreage is up and not down from the December estimates,” Roose says.
For soybeans, the average analysts 2014 harvested acreage estimate is 83.1 million vs. the USDA’s December estimate of 83.4 million.
SOYBEAN MARKET EYES PRODUCTION NUMBER
Aside from a 50-cent rally in beans, early this week, the market seems to be in a range trading pattern. If this report doesn’t break the markets out of that range, downside pressure could be ahead, analysts say.
“This is a market-moving report,” Roose says. The average crop size estimate move up or down, on this report since 2000, has been 29 million bushels on soybeans. The largest gain was 62.0 million in 2007 and the largest drop was 45 million in 2010.”
Roose adds, “Since we already know the export pace, we know soybean crush amounts, the soybean market will eye production numbers in this report.”
On Monday, the USDA is expected to report 2014-15 U.S. soybean production at 3.965 billion bushels, according to the analysts average estimate. This compares to the USDA’s December estimate of 3.958 billion.
For U.S. 2014-15 corn, the analysts average estimate is 14.366 billion bushels, compared to the USDA’s December estimate of 14.407 billion.
BREAKOUT DATA NEEDED
For 2 1/2 months, the soybean market has been in a trading range. “If the report doesn’t offer a bullish breakout, then the market will come under some real pressure. “The fundamentals are negative, at face value. So, we need a bullish South America weather forecast, if this Monday report doesn’t take the U.S. ending stocks under 400 million bushels.”
For U.S. 2014-15 soybean carryout, the pre-report average analyst estimate is 402 million bushels, compared to the USDA’s December estimate of 410 million.
The U.S. 2014-15 corn carryout is expected to come in at 1.94 billion bushels, according to the average analysts estimates. In December, the USDA pegged the corn carryout at 1.998 billion bushels.
“For corn, if the ending stocks are below 1.7 billion, it would be bullish to the market. If ending stocks come in near 2.0 billion bushels, it tells you that this market has more room to the downside and that we could challenge the $3.40 to $3.60 area, basis March corn futures,” Roose says.
Alan Brugler, President, Brugler Marketing & Management LLC, agrees that the biggest bearish input would be if Dec 1 stocks are well above estimates, forcing WASDE to hike year end ending stocks forecasts.
Brugler added, “The bulls need WASDE to cut projected corn ending stocks another 100 million, or 50 million on beans.”
