World Agricultural Supply and Demand Report Recap

USDA released its monthly World Agricultural Supply and Demand Estimates (WASDE) report earlier this morning (Friday, April 8).  The report revealed few changes for grains as soybeans and corn had no wholesale changes to their balance sheets.  Rice and wheat each had some minor changes and cotton saw its balance sheet change drastically compared to the March report, especially at this point in the marketing year.

Corn swapped feed use for ethanol use and the corn ending stocks are projected at 675 million bushels (mbu) which is no change from March’s number and higher than pre-report expectations.  Trade digested last week’s Grain Stocks report – which lowered the amount of corn in storage – and expected to see corn ending stocks lowered to 589 mbuu. The same was true for soybeans as trade expected the ending stocks number to be reduced from 140 mbu reported in March to 136; however, USDA made no change to the soybean ending stock projection and only made a few changes to where soybeans were being used (crushings, seed and exports were reduced by 5,000, 2,000 and 10,000 bushels, respectively, while residual use was increased by 17,000 bushels).  The wheat ending stock forecast was lowered by 4,000 bushles from last month’s report to 839,000 bushels as seed use was bumped higher by the same amount.  Trade expected wheat ending stocks to be raised from 843,000 in March to 857,000.  Rice ending stocks estimates were raised by 2 million hundredweight (mcwt) due to a decrease in domestic use.  Exports were steady as rough and milled exports swapped 3 mcwt.  Cotton was the biggest surprise in the report, in my opinion, as the yield per acre was adjusted – which typically does not happen this late in the marketing year ending June 30.  Cotton yield was lowered from 821 pounds per acre, reported for the past few months, to 811.  The resulting change to production was a decrease of 220,000 bales.  That coupled with an increase in domestic use of 100,000 bales resulted in a decline of cotton ending stocks by 300,000 bales (after taking into account a decrease of 2,000 for unaccounted bales) now estimated at 1.6 million bales.

Corn and soybean markets opened lower as a result of the bearish WASDE report but have since rebounded and are trading slightly above Thursday’s close.  Wheat futures are drifting lower in early trading despite the lower than expected ending stock number in the WASDE.  Old crop cotton is higher while new crop contracts are currently lower on the day, indicating the short-term tight supply situation currently at hand.  Although prices remain strong for the 2011 crop, the shortfalls for the 2010 crop have been priced into the new crop contracts for the time being.