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Ag markets brace for highlight in crop data year

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Will world soybean inventories recover in 2012-13? Will US corn stocks rebound from one of their tightest ever to one of their largest? Will wheat supplies pull back from near-record levels?

Answers, or at least likely solutions, to these questions will be revealed later on Friday when the US Department of Agriculture unveils its latest monthly Wasde report on world crop supply and demand estimates.

These briefing are normally highlights of the agricultural commodities calendar. But particularly this time, when the USDA reveals its first full forecasts for 2012-13.

"It will be a big day. We are going to learn a lot. And it will very likely be a price-moving event," Don Roose, president of broker US Commodities, said.

'Overwhelmingly bearish number'

The market's initial reaction will depend mainly on two numbers – data for US corn and soybean inventories at the close of 2012-13, Jerry Gidel, feed grains analyst at Rice Dairy, said.

Market forecasts for Wasde corn data, (change on current estimate)

2011-12 - US ending stocks: 749m bushels, (-52m bushels)World ending stocks: 122.0m tonnes, (-700,000 tonnes)2012-13 - US ending stocks: 1.714bn bushels, (n/a)

World ending stocks: 136.8m tonnes, (n/a)Sources: ThomsonReuters poll, USDA

The consensus forecast for corn inventories at the close of next season is 1.71m bushels, a sharp recovery from the 749m-bushel figure analysts believe the USDA will plug in for the close of 2011-12, in August.

This reflects growing ideas that the USDA may increase its estimate for the corn yield to reflect rapid sowings, a factor "highly beneficial" for yields, according to Macquarie analyst Chris Gadd.

"The early plant date suggests the pollination date will be brought forward in the year. This lowers the risk that extreme weather could affect pollination," he said.

Wide range

For soybeans, US stocks are seen falling to 164m bushels in 2012-13, from an estimated 214m bushels at the close of the current season, given the prospects – initially, at least – of relatively small sowings of the oilseed despite export demand whetted by poor South American harvests.

However, there is a marked range in analyst forecasts, ranging from 87m bushels to 250m bushels, for carryout stocks next season.

Such differences are also true for corn, for which the range of estimates spans from 1.21bn bushels to 2.07bn bushels, and for wheat too.

Some analysts see US wheat stocks ending 2012-13 at 609m bushels, and others at more than 900m bushels – and that is for a grain for which harvesting, of winter crop, has begun, reducing the element of weather risk in forecasts.

World picture

If the wide ranges of estimates appear to indicate a market unsure what to expect from the Wasde, an extra uncertainty is provided by global data too.

Market forecasts for Wasde soy data, (change on current estimate)

2011-12 - US ending stocks: 214m bushels, (-36m bushels)World ending stocks: 53.3m tonnes, (-2.2m tonnes)2012-13 - US ending stocks: 164m bushels, (n/a)World ending stocks: 59.3m tonnes, (n/a)Sources: ThomsonReuters poll, USDA

"The market may then look at whether, say, the former Soviet Union is going to have a bucketload of corn or wheat to load onto international markets at low prices."

And many analysts are forecasting strong rebounds in South American soybean crops in 2012-13, now the La Nina weather pattern has passed, with Macquarie pegging the Brazilian harvest at a record 80m tonnes, a jump of more than 20% on this season's result.

'Risks for wheat'

Still, whatever the USDA's estimates on Thursday, these represent of course initial estimates rather than final scores.

Indeed, some of the data will be for crops, such as South American soybeans and corn, which are months away from even being planted.

"A year ago, people were talking about Brazil harvesting 80m tonnes of soybeans, before the La Nina hit," Mr Gidel said.

And there are plenty of weather scares out there, including dryness in the south of the former Soviet Union which represents "one of the biggest risks for wheat", Macquarie's Chris Gadd said.

"If these dry conditions continue throughout the next few weeks, a large reduction in production would be likely."

'Buying the hell out of it'

In China, dryness in the north is creating a stir in the market.

Market forecasts for Wasde wheat data, (change on current estimate)2011-12 - US ending stocks: 778m bushels, (-15m bushels)World ending stocks: 205.4m tonnes, (-900,000 tonnes)2012-13 - US ending stocks: 782m bushels, (n/a)World ending stocks: 195.6m tonnes, (n/a)Sources: ThomsonReuters poll, USDA

"If these issues develop into a crop-threatening scenario, we could see China's import dependence absorb a lot of the increased surplus that we forecast for the 2012-13 season.

"These weather risks could be the rationale behind the Chinese starting their new crop purchasing programme earlier than usual."

Mr Gidel, noting a link between El Nino conditions, which some forecasters believe will kick in, and dryness in Manchuria, said: "If Manchuria does blow up, now matter how bearish a new crop corn situation we may appear to have, China will be buying the hell out of it."


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