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Will 'quiet' Wasde provide corn and soy noise after all?

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Will grain markets get a surprise in a key crop report today from an upgraded US corn yield estimate?

That would be something of a curve ball. The US Department of Agriculture, which later releases the June edition of its benchmark Wasde crop report, has a habit of containing its optimism so early in the growing season.

"The USDA may lower the corn yield figure, but generally to not raise in it June," said Richard Nelson, chief strategist at broker Allendale.

By "generally", Mr Nelson means "on records going back 25 years", during which the yield figure has never been raised in a June Wasde.

'Whispering campaign?'

Still, there is some speculation that this year may be an exception.

"Is there a whispering campaign going on?" Jerry Gidel, chief feed grains analyst at Rice Dairy, asked

"A lot of people seem concerned about the yield figure.

"The way the market is trading, the yield is going to be 167, 168 bushels per acre," above the current estimate of 165.3 bushels per acre.

'Bigger boost'

And certainly, there has been plenty of talk of analysts upgrading their yield forecasts.

Forecasts for corn in Wasde report, (existing figure)

US ending stocks 2013-14

: 1.170bn bushels, (1.146bn bushels)

Range of estimates: 1.121bn-1.279bn bushels

US ending stocks 2014-15

: 1.716bn bushels, (1.726bn bushels)

Range of estimates: 1.405bn-2.282bn bushels

World ending stocks 2013-14

: 168.35m tonnes, (168.42m tonnes)

World ending stocks 2014-15

: 181.52m tonnes, (181.73m tonnes

Sources: USDA, ThomsonReuters

"Weather and all other items are bearish, particularly for the new crop," said Sterling Smith at Citigroup, saying that "we think the market may be looking for a bigger boost in the yield".

After all, sowing accelerated strongly after a slow start, and the condition of the US crop, at 75% good or excellent as of Sunday according to official ratings, is one of the best ever.

Weather ahead looks like being benign, with an El Nino supposed to be kicking in, a weather pattern which tends to bring the Midwest a cool summer beneficial for corn, and soybean, yield prospects.

'Grounds to lift yield hopes'

"I think the USDA has got a bit less conservative, more willing to lead the market a bit," a grain industry executive told

"You can argue that there are grounds to lift corn yield hopes a little bit, so as to not look so flat footed while private estimates race higher."

Still, the executive said that "on balance, I would imagine they will play safe and stick with a yield figure which would already be a record".

Did Joseph Glauber, the USDA chief economist, drop a hint on Tuesday, when he told the International Grains Council conference that June Wasde reports are "usually fairly quiet"?

'Little bit generous'

Besides, the USDA stuck its neck out a bit in the last Wasde, in raising its forecast for corn exports in 2013-14 by 150m bushels to 1.90bn bushels, an estimate many observers see being reversed this time.

"The USDA was a little bit generous last month," Mr Nelson said, forecasting that some of that 150m bushels would be given back.

"While the last two weeks have been OK, the previous three weeks were clearly below the pace" needed to the estimate for the full season.

China's move this week to bar imports of US distillers' grains, produced as a byproduct of corn ethanol manufacture, in the latest spat over the GM MIR 162 corn variety is only enhancing expectations of a cut to numbers for the grain itself.

China has 317,000 tonnes of the grain ordered from the US, but as yet not imported, with growing questions as to whether these deals will be fulfilled.

Feed prospects

Still, demand prospects elsewhere look better.

Forecasts for soybeans in Wasde report, (existing figure)

US ending stocks 2013-14

: 127m bushels, (130m bushels)

Range of estimates: 119m-139m bushels

US ending stocks 2014-15

: 319m bushels, (330m bushels)

Range of estimates: 245m-364m bushels

World ending stocks 2013-14

: 66.43m tonnes, (66.98m tonnes)

World ending stocks 2014-15

: 81.97m tonnes, (82.23m tonnes)

Sources: USDA, ThomsonReuters

"As grain prices have fallen, demand from livestock feeders has increased," he said, noting that even in hogs, although the porcine epidemic diahorrea (PEDv) epidemic has cut numbers, slaughter weights have increased.

"Feeding to heavier weights means extra demand for feed grains."

'Just gone nuts'

As for making ethanol, another big source of corn demand, US production has "stayed relatively strong", Mr Roose added.

Mr Gidel was less reserved, saying output has "just gone nuts", hitting 944,000 barrels a day last week, data on Wednesday showed, a figure not beaten since 2011.

The estimate for corn used in ethanol production "could go up 50m bushels", making up for any drop in the export figure.

Still, overall, investors expect the Wasde to raise by 24m bushels to 1.17bn bushels the figure for US stocks at the close of 2013-14.

'Maxed out'

For soybeans, the revisions are more problematic.

Forecasts for wheat harvest in Wasde, (existing figure)

Hard red winter

r: 733m bushels, (746m bushels). 2013: 744m bushels

Soft red winter

: 455m bushels, (447m bushels). 2013: 565m bushels

White winter

: 207m bushels, (209m bushels). 2013: 225m bushels

All winter wheat

: 1.394bn bushels, (1.403bn bushels. 2013: 1.534bn bushels

All wheat

: 1.964bn bushels, (1.863bn bushels. (2.130bn bushels)

Sources: USDA, ThomsonReuters

And yet US exports remain stubbornly strong, and the domestic crush is proving resilient too.

"Wasde analysts may be forced to make some hard choices with regards to the US soybean balance table," said Richard Feltes at Chicago-based RJ O'Brien.

"The USDA has repeatedly shown an unwillingness to tweak US soy stocks below 130m bushels.

"But prior 'escape hatches' on imports and residual are maxed out," potentially limiting their scope on these scores to balance out supply and demand.

Negative soybeans?

In fact, some are proposing the potential for a negative number in the residual, a somewhat amorphous figure, which has gone in the red in some previous seasons, typically seen as a sign that the preceding harvest was understated.

Forecasts for wheat stocks in Wasde report, (existing figure)

US ending stocks 2013-14: 590m bushels, (583m bushels)

Range of estimates: 565m-625m bushels

US ending stocks 2014-15

: 552m bushels, (540m bushels)

Range of estimates: 475m-658m bushels

World ending stocks 2013-14

: 186.15m tonnes, (186.53m tonnes)

World ending stocks 2014-15

: 187.00m tonnes, (187.42m tonnes

Sources: USDA, ThomsonReuters

"The uncertainty is how low they are willing to go on their carryover estimate and whether they would ever show a negative residual to indicated that the crop is underestimated," Jefferies Bache said.

Still, Mr Feltes believed such as move unlikely.

"The USDA is unlikely to post a negative old crop US soybean residual until after the June stocks 30 stocks report," which will give a better idea of how big supplies really are.

'Still room'

Indeed, at Allendale, Mr Nelson said that there was "still room to manage the forward ending stocks number", forecasting a downgrade to 119m bushels.

Extra scope for lifting export and crush numbers could be gained from lifting the import estimate and cutting the seed use number.

Although US imports have been slower than investors expected into early May, "trade feels that imports from Brazil will be picking up through August", he said.

Still, Brazilian supplies may not have been as strong as thought, to judge by a downgrade by the country's Conab bureau to its harvest estimate.

Which adds only another uncertainty to a report which perhaps may not prove quite as much of a formality as Mr Glauber signalled.


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