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Will 'mundane' Wasde actually prove a market mover?

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Will Monday spring a surprise on grain investors?

The November version of the US Department of Agriculture's Wasde report is, by repute, one of the less important editions of the benchmark monthly crop briefing.

"By this time of year, we usually know a lot about the crop already," Don Roose, president of Iowa-based broker US Commodities, said.

At Chicago-based Allendale, Rich Nelson, chief strategist, said: "Historically, the November report is a bit of an interim report," between the October edition - which brings important yield data based on actual crop findings, rather than assumptions based on the likes of rainfall and temperatures – and the January Wasde, which publishes final numbers.

For the November Wasde, the USDA uses data from some 11,000 farmers, and for the January report from 60,000.

'Still some uncertainties'

However, the November Wasde, on Monday, looks like being no formality, with analysts' expectations of the report differing significantly for many of the key variables.

Forecasts for 2014-15 corn in Wasde report, (existing figure)

US yield

: 175.23 bushels per acre, (174.2 bushels per acre)

Range of estimates: 171.4-178.6 bushels per acre

US ending stocks

: 2.135bn bushels, (2.081bn bushels)

Range of estimates: 1.850bn-2.282bn bushels

World ending stocks

: 192.77m tonnes, (190.58m tonnes)

Range of estimates: 185.6m-194.18m tonnes

Sources: USDA, ThomsonReuters

On corn yield, analysts are in more disagreement than last time, with the spread of estimates at 7.2 bushels per acre, compared with 6.4 bushels per acre ahead of the October Wasde.

"This time, there are still some uncertainties around," Mr Roose, told, with the late harvest seen as delaying some of the data inputs which typically come earlier in the autumn.

Acreage question

One area of some debate, for instance, is whether the USDA will alter, for a second successive month, its forecast for domestic corn and soybean area.

"Is there going to be an acreage adjustment?" Mr Roose said.

"It's a possibility," with the USDA "in the spring" saying it might in October and November alter its area data, although officials said some three weeks ago that they were "pretty comfortable with average.

"Were they showing their hand, or was it too early to know?"

At broker Rice Dairy, chief feed grains analyst Jerry Gidel flagged that many investors had expected the USDA last month to cut its forecast for harvested corn area by twice its actual downgrade of 742,000 acres, leaving "some wondering if more changes might be coming", although with any revision likely to be focused on the January Wasde.

'Stressed plants'

Still, the big question is about US corn and soybean yields, over which the upward march in estimates has stalled as harvest has reached the western Corn Belt – albeit there are no doubts that the final figures will set records for both crops.

Forecasts for 2014-15 soybeans in Wasde report, (existing figure)

US yield

: 47.608 bushels per acre, (47.1 bushels per acre)

Range of estimates: 46.8-48.7 bushels per acre

US ending stocks

: 442m bushels, (450m bushels)

Range of estimates: 403m-513m bushels

World ending stocks

: 90.37m tonnes, (90.67m tonnes)

Range of estimates: 89.50m-92.55m tonnes

Sources: USDA, ThomsonReuters

From Iowa, Mr Roose said that crop results in the state, and to a lesser extent Minnesota, had "not shown the monster yield seen in the eastern Corn Belt".

The poorer yields appear a result of heavy rains in June in the two states "that the rest of the Corn Belt did not see", said Allendale's Rich Nelson.

The states received "two separate rain systems", one of 8 inches and one of 5 inches, which many "very soggy soils, which stressed plants going into pollination", Mr Nelson told

At Futures International, Terry Reilly said there appears to be some "quality issues for soybeans, but more of a yield problem for corn".

'Great crush margins'

And this before getting to demand factors, which are also seen as ripe for review, particularly in soybeans, for which US exports have been unusually strong so far in 2014-15.

Indeed, total commitments thus far are, at 35.6m tonnes, up 2.4m tonnes year on year, and quoted by many as setting a record pace.

"China is getting a little short of supply," said Mr Nelson, noting expectations last week from the country's official CNGOIC ag think tank that imports will jump to 5.81m tonnes this month, and to 6.8m tonnes in December, from 4.2m tonnes in October.

"China has great crush margins."

Terry Reilly forecast a 25m-bushel increase in the USDA estimate for domestic soybean exports in 2014-15.

'The correct price'

For grains, the US data have not been so outstanding, especially for wheat, in which US exports are, at 15.4m tonnes so far this season, down 26% year on year.

Forecasts for 2014-15 wheat in Wasde report, (existing figure)

US ending stocks

: 660m bushels, (654m bushels)

Range of estimates: 634m-682m bushels

World ending stocks

: 192.15m tonnes, (192.59m tonnes)

Range of estimates: 189.79m-196.40m tonnes

Sources: USDA, ThomsonReuters

For corn, Allendale flagged the potential for the large US crop to force an uptick in supplies from an OK start.

"Though exports are behind the pace needed to hit USDA's October estimate we assume they will end 25m bushels higher," Mr Nelson said.

"We will find the correct price needed to move this product."

Brazil debate

Some revisions are expected to South American crops, to take account of a slow start to the Brazilian sowing season thanks to a dearth of rain.

Influential analysis group Oil World, for instance, has cut its forecast for Brazilian soybean production to 89m tonnes, below the USDA's current forecast of 94m tonnes.

"But the crop will still get planted," Mr Roose said, taking a more upbeat view on production potential, and reminding that soybeans are known as the "miracle crop" for their ability to overcome poor conditions.

Nonetheless, it is another area of disagreement for a November Wasde which might prove more momentous that some believe.

The report "is expected to be rather mundane, but can always contain surprises", said Richard Feltes at Chicago broker RJ O'Brien.


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