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Big US crop data day to provide questions as well as answers

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Usually, when it comes to the end-of-June double bill of major reports on US crops – one on sowings and the other on stocks - it is the briefing on grain inventories which takes the higher profile.

This, after all, gives a rare insight into the half of the balance sheet – demand - which is often more amorphous and difficult to judge than the production forecast.

While the likes of exports and ethanol use of grain are closely monitored, consumption by, for example, livestock producers is more difficult to gain a handle on, with data on animal numbers infrequent and not telling the whole story of demand for different feed grains.

Diminished uncertainty

But this time, it is the inventory report that is cast in greater certainty, and attracting the least comment.

Estimates for USDA crop stocks estimates, and (year-ago figure)

Corn: 4.555bn bushels, (3.852bn bushels)Range of estimates: 4.419bn-4.700bn bushelsSoybeans: 670m bushels, (405m bushels)Range of estimates: 604m-707m bushelsWheat: 718m bushels, (590m bushels)Range of estimates: 688m-740m bushelsSources: USDA, Reuters

This time, the gaps are 6.4% for corn and 17.1% for soybeans, with the reduced uncertainty seen largely down to the passing of the outbreak of porcine epidemic diahorrea (PEDv), which has given more confidence in herd numbers, and over the improved conviction in cattle dynamics too.

OK, the bird flu outbreak has taken a toll on poultry numbers, but liquidation numbers are closely monitored by the US Department of Agriculture, and published on a timely basis too.

"If we had lost 150m-200m broilers, then I think it might be a different matter, but the 50m we did lose is not such a big issue," Jerry Gidel, chief feed grains analyst at Chicago-based broker Rice Dairy, told Agrimoney.com.

'Harvest overestimated'

The greater uncertainty over soybeans reflects ideas actually more about production than consumption, with ideas that the stocks figure, accurate for June 1, could end up smaller than the trade has expected because the harvest last year was smaller than has been thought.

"People seem to be finally realising that the crop last year was overestimated," a factor which could be recognised initially in terms of an unusually large figure for undetermined disappearance rather than a lower harvest estimate.

Continued strength in spreads between prompt and later soybean contracts "would seem to indicate that we simply don't have that many soybeans left", said Brian Henry at Minneapolis-based Benson Quinn Commodities.

Market signal

He added that the premium of "$0.40-50 a bushel over the last couple of months" enjoyed by the spot contract "you would not expect if all those beans were there.

Forecasts for US crop sowings data, current estimate and (year ago)

Corn: 89.292m acres, 89.199m acres, (90.597m acres)Range of estimates: 88.45m-91.742m acresSoybeans: 85.171m acres, 84.635m acres, (83.701m acres)Range of estimates: 83.76m-86.76m acresWheat: 55.867m acres, 55.367m acres, (56.822m acres) Range of estimates: 55.1m-57.2m acresSources: USDA, Reuters

The current USDA forecast for US soybean inventories at the end of 2014-15, of 330m bushels, may end up being reduced, many commentators believe.

"I think it will end up below the 300m bushels level, but not in one go, because that's not the way the USDA operates," Mr Gidel said.

Corn uncertainty

For acreage, by contrast, the uncertainty over what data the USDA will show is markedly higher than a year ago for corn.

At 3.6m acres, the gap is three times bigger than last year, with the extent of the gap largely down to uncertainty over how much a strong early pace to the sowing season encouraged growers to plant more of the grain, and exploit strong seeding conditions.

In 11 out of the last 15 years, the USDA's end-June acreage report has shown a bigger area than that forecast by the March report showing plantings that farmers intended to make – and by a hefty margin in these years, of an average of 1.1m acres, research by Allendale shows.

(That said, the June area estimate is often as high water mark, with soybean and corn area, in wet years, declining by an average of 1.75m acres and 600,000 acres respectively, according to RJ O'Brien, analysis which excludes the supremely wet year of 1993.)

Two figures

For soybeans, the range of market estimates for plantings is, at 3.0m acres, actually a little lower than last year.

But that does not actually reflect any sense of certainty about the data. Quite the opposite. The figure that the USDA produces for acreage will almost certainly be dismissed immediately by traders as an overestimate.

OK, the average forecast for the acreage report figure for soybean sowings "is about 500,000 acres above the forecast that the USDA currently has in place," said Bill Tierney at AgResource.

"But the market predicts the actual figure will be below that."

RJ O'Brien's Richard Feltes said:" The trade will be included to trim an additional 500,000-1.0m acres off the USDA number on Tuesday."

Weather setbacks

The trouble is the farmer survey on which the acreage report is based was undertaken in the first two weeks of the month – before extreme wetness really emerged as setback to plantings of the oilseed in particular in the likes of Kansas and Missouri in the western Corn Belt.

(Corn is planted a little before soybeans, meaning that its sowings escaped the worst of the wet spell, although excess moisture has compromised the quality of some of what was planted, as data overnight showed.)

Farmers will prove unable to plant much of what they had intended to sow – although the extent of the seedings that will go unfulfilled remains in doubt.

The USDA data overnight showed that, with the sowings window closing, there are some "2.5m acres of soybeans that should be in the ground that are not, and a total of 5.1m acres unplanted" overall, Mr Feltes said.

"The trouble with the acreage report is that it is a month too early this year," Brian Henry at Benson Quinn Commodities said.

'Pins and needles'

Indeed, it is possible that, to gauge a more accurate figure the USDA may undertake a resurvey, for feeding into the August edition of the USDA's benchmark monthly Wasde world crop supply and demand report, Mr Tierney said.

Even so, USDA resurveys have a history of not producing big changes in acreage, and it may not be until the autumn that a proper figure is known, when officials have data from returns to the Farm Service Agency, which handles growers' returns showing what plantings they did completed, and what they were prevented from sowing.

"If there is a big change in the soybean acreage number, it would probably not come until the October Wasde report," Mr Tierney told Agrimoney.com.

At Rice Dairy, Jerry Gidel said "we might not even know until January.

"That's what's going to make this thing pins and needles all the way through."

'Tempest in a teapot'

Even by October, of course, the market will have other matters to factor in.

"There will be a focus on whether we might be on for a record South American crop," which will be being planted, Mr Tierney said.

And there will be the matter of the US yield which could likely have a far bigger impact on the final production figure than the potential lost sowings, which might account for perhaps 2% of total area.

"That will not stop people making a tempest in a teapot," at the time, over the acreage data, he said.

Which may offer some hope to any investors caught out by whatever figure the USDA does publish later.

The path to a final figure may prove a bumpy one allowing chances of gains for both bears and bulls.

By Agrimoney.com

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