PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 08:17 GMT, Friday, 7th Feb 2014, by Mike Verdin
Will US report show 'tightest soy balance sheet in history'?

The best thing about February, some people say, is that it is only 28 days long.

Even for agricultural commodity watchers, the month's edition of the Wasde report, the benchmark US Department of Agriculture crop briefing series, has a reputation for being one of the more snoozy ones.

With estimates for the latest northern hemisphere harvests largely sealed, and southern hemisphere ones not advanced enough to offer accurate yield changes, it can offer little scope for changing production estimates.

And as for demand, one of the biggest influences here, the latest US quarterly stocks report, is factored into January Wasdes.

'Tightest balance sheet in history'

But the Wasde on Monday could nonetheless set a landmark.

Forecasts for 2013-14 soybeans in Wasde report, (existing figure)

US ending stocks: 143m bushels, (150m bushels)

Range of estimates: 125m-164m bushels

World ending stocks: 72.67m tonnes, (72.33m tonnes)

Range of estimates: 71.0m-75.35m tonnes

"It could show the tightest balance sheet in history" for US soybeans, said Don Roose, president of Iowa-based broker US Commodities.

Which would, of course, imply soaring prices, were supplies of soybeans, and other oilseeds, not ample elsewhere.

"Canada's canola stocks very large, and South American soybean crops are expected to come in strong."

Still, the conundrum of thin US inventories compared with strong foreign ones provides some scope for surprises.

'Real problem'

The USDA analysts in charge of oilseeds estimates, "have a real problem on their hands", said Bill Tierney, a former principal grains economist at the USDA, now chief economist at AgResource.

"They have a record pace of soybean exports, soymeal exports, already bigger than projections" for the whole of 2013-14.

But the estimate for stocks at the close of the season is already somewhere near levels that many consider pipeline supplies, meaning that an increase to the export estimate would require tinkering with other numbers to make the balance sheet work.

This will likely mean reducing the amorphous "residual" figure, currently at 22m bushels, but too much of a raise in the import figure may be difficult given that, at 25m bushels (680,000 tonnes) it is already the second highest in history.

'Understandably nervous'

The export issue has been made only stronger this week, with the USDA on Thursday revealing weekly soybean export sales for 2013-14 of 577,000 tonnes, "up 59% from the previous week and 25% from the prior four-week average".

Forecasts for 2013-14 corn in Wasde report, (existing figure)

US ending stocks: 1.619bn bushels, (1.631bn bushels)

Range of estimates: 1.574bn-1.748bn bushels

World ending stocks: 159.60m tonnes, (160.23m tonnes)

Range of estimates: 156.27m-163.20m tonnes

Sales have now trenched 1.58bn bushels 85m bushels above the figure USDA analysts currently have pencilled in for the whole season, which is less than half way through.

The cancellations by China, the top soybean importing country, of US orders, given the ramp up of the harvest in Brazil and prospect for a strong result, have signally failed to materialise as investors have expected.

It creates a balance sheet puzzle investors are grappling with too.

"The trade is understandably nervous over mounting US soy sales and the lack of Chinese cancellations to date", said Richard Feltes at broker RJ O'Brien.

Corn vs soybeans

Anne Frick at New York-based Jefferies Bache, came up with a Solomon-like solution to an expectation that the USDA will raise its estimate for US soybean exports by 20m bushels.

This will be balanced "with 10m bushels coming from an increased import estimate, and 10m bushels coming from a reduction in ending stocks to 140m bushels", a historically low inventory figure when compared with demand for the oilseed.

However, Rich Nelson proposed that there was still potential for the USDA, with large Chinese cancellations still possible, to ignore the export issue for now.

While an increase in the corn export number was "certain", for soybeans it was just "likely".

'Offer a surprise'

Indeed, on corn, the USDA has much greater latitude, with ample supplies to balance out strong US export sales, which came in strong again last week at 1.70m tonnes, Thursday's data showed.

Forecasts for Wasde South American harvest estimates (existing figure)

Argentine corn: 23.82m tonnes, (25.0m tonnes)

Range of estimates: 19.8m-25.0m tonnes

Argentine soybeans: 54.13m tonnes, (54.5m tonnes)

Range of estimates: 52.7m-57.0m tonnes

Brazilian corn: 69.99m tonnes, (70.0m tonnes)

Range of estimates: 66.1m-74.0m tonnes

Brazilian soybeans: 89.76m tonnes, (89.0m tonnes)

Range of estimates: 88.3m-91.0m tonnes

The US has now sold 91% of the corn forecast for 2013-14, less than half way through, and compared with an average of 65%, Benson Quinn Commodities said.

"That gives confidence to traders believing the USDA will offer a surprise on Monday by taking the corn export estimate up more than the 50m bushels that is expected at this point," the Minneapolis-based broker said.

"Either way, the corn market is indicating it has value," even with futures prices around their highest in three months.

Questionable estimate

Not that all the US corn demand data are viewed as so strong.

The US corn feed estimate, of 5.3bn bushels, is a "very large number", Mr Nelson said, up 22%, and a figure he felt certain to be reduced given livestock dynamics implying fewer stomachs to fill than had been expected.

Official data last week showed the US cattle herd at its lowest in 63 years, and below market expectations.

And the spread of porcine epidemic diarrhoea virus (PEDv) means that "hog number might stay equal with last year's and not increase as was originally thought".

"But they will not change the feed number for now," with amendments on this score are only likely on a future Wasde, after insight from the next quarterly grains report.
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