Investors have little expectation of a surprise in Friday's Wasde crop briefing. Could they end up wrong-footed?
Rich Nelson, chief strategist at Allendale, speaks for the
consensus when he says this edition of the US Department of Agriculture's
monthly crop supply and demand reports should prove "a minor" affair.
It will "make a number of adjustments to demand" in 2012-13,
with estimates for domestic harvests, at least, already finalised.
The expectations are that these will prompt a small rise in
forecasts for the domestic corn and wheat inventories.
"US corn and wheat have had some trouble with exports," Mr Nelson
said, corn especially, with disappointing hard red winter wheat trade dragging
on wheat shipments.
But these have already been priced in, with the declines in price
of wheat, on course for a seventh successive week of decline, and corn.
'Quite a pickle'
Still, the January edition of the Wasde managed a few
surprises, including an unexpectedly large cut to the estimate for domestic wheat
inventories at the close of 2012-13, and a downgrade in the corn stocks number
too, when investors had forecast an upgrade.
Estimates for Wasde corn data, 2012-13 and (change on current)
US ending stocks: 643m bushels, (+9m bushels).
Biggest estimate: 695m bushels. Smallest estimate: 560m bushels
World ending stocks: 117.79m tonnes, (-247,000 tonnes).
Biggest estimate: 120.0m tonnes. Smallest estimate: 116m tonnes
Argentina harvest: 25.45m tonnes, (-1.55m tonnes)
Brazil harvest: 72.34m tonnes, (-157,000 tonnes)
Sources: Reuters, USDA
Where might the surprises in today's briefing occur?
For Jerry Gidel, chief feed grains analyst at Chicago-based
broker Rice Dairy, "it is all about soybeans".
"The latest US export numbers have put the USDA in quite a
pickle," in how to factor them into a balance sheet which was already looking exceptionally
tight, with stocks seen ending the year at one of their lowest levels in
"The USDA needs to raise its export number, but where are
the extra soybeans going to come from?"
To get a better gauge of the "pickle" on the 2012-13 balance,
consider the USDA's soybean export bombshells this week.
Estimates for Wasde soy data, 2012-13 and (change on current)
US ending stocks: 120m bushels, (-5m bushels).
Biggest estimate: 130m bushels. Smallest estimate: 100m bushels
World ending stocks: 59.45m tonnes, (-672,000 tonnes).
Biggest estimate: 60.6m tonnes. Smallest estimate: 58.0m tonnes
Argentina harvest: 50.87m tonnes, (-2.129m tonnes)
Brazil harvest: 83.15m tonnes, (-355,000 tonnes)
Sources: Reuters, USDA
On Monday, it released a strong weekly soybean export figure,
of more than 40m bushels, up 45% week on week, and on Thursday revealed sales
of 390,000 tonnes. And this excludes a sale of 330,000 tonnes revealed on
Tuesday, which will make it into next week's weekly soybean data.
"Total sales now stand at 96% of the total USDA projection for
the 2012-13 crop year," of 1.345bn bushels, Darrell Holaday at Country Futures
"That is unbelievable given the fact that we are just six months
through the crop year and given the fact that there are only 3.6m tonnes (132m
bushels) that have been sold and not shipped.
This makes potential cancellations of import orders, a big
fear in December as China appeared to be walking away from purchases, "much
less of a factor".
'Reduced wiggle room'
One way for the USDA to resolve the issue is simply to lower
its estimate for inventories at the end of the marketing year, although it
looks unlikely to move far in that direction.
Estimates for Wasde wheat data, 2012-13 and (change on current)
US ending stocks: 704m bushels, (+13m bushels).
Biggest estimate: 754m bushels. Smallest estimate: 670m bushels
World ending stocks: 176.55m tonnes, (-182,000 tonnes).
Biggest estimate: 178.0m tonnes. Smallest estimate: 174.5m tonnes
Sources: Reuters, USDA
USDA officials have consistently stuck by ideas of pipeline
minimums for crops stocks, and the idea of there being a floor level for
supplies well above zero, counting in volumes left on farm, in elevators, in
buyers' stores, port silos and merchants' barges.
Another way is for the USDA to lift its expectations for US imports
– although given that the the 544,000 tonnes (20m bushels) already factored in
is already well into unchartered territory, officials might baulk at that too.
Mr Gidel said: "They may have to cut the amount put down to 'residual',"
a rather amorphous category, "although they are not going to like it so early in
the season, reducing their wiggle room."
The market deliberations over relatively small US volumes of
the oilseed appear far more significant than those for potentially far bigger
revisions to South American soybean harvests, seen in line for downgrades.
But then investors have significant transparency on these
crops from a range of other commentators.
Significantly, Conab, Brazil's crop bureau, on Thursday cut its estimate for the Brazilian soybean harvest from 83.4m tonnes, in line with
the USDA's current forecast, to 82.1m
Indeed, even the USDA estimates US corn and wheat balance
sheets could prove bigger sources surprises, if Rabobank is right on the
potential for exports to pick up from their early weakness in 2012-13.
Rabobank pegged its forecast for US wheat exports at 1.075bn
bushels, 25m bushels above the USDA estimate, saying it saw "limited evidence
of slowing importer demand".
Thursday's weekly US export sales data came in at 828,000
tonnes, the third best result in the past two years.
"With US wheat now the world's cheapest, we expect that the
upward trend in exports will continue," the bank said.