Macquarie Agri-View- Anticipating bullish USDA reports

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Macquarie Agri-View
Anticipating bullish USDA reports
Feature article
 The market faces a barrage of key USDA reports this week. On 12 January
2011 the USDA will release the January WASDE, the final 2010/11 Crop
Production Report, the December Quarterly Stocks Report, and a Winter
Wheat Seedings report. Each of these reports has the potential to significantly
alter the fundamental parameters of the grain and oilseed markets.

 Judging from the past there is ample reason for the market to be nervous
about these reports, as they have often been followed by dramatic price
moves. One needs to look back only as far as January 2010 to see how much
of an impact these reports can have on prices. The shocking increase to US
corn supplies revealed in the January 2010 numbers led to a collapse in corn
prices from $4.22/bu on 11 January to $3.50/bu by 05 February 2010. We do
not expect such a dramatic change to US corn or soybean production
estimates in the January 2011 Crop Production report, but we think there is a
risk that the Quarterly Stocks report could contain some surprises.
 Macquarie expects the January reports will be bullish for corn and
soybeans, as strong/record demand for US supplies combined with
likely declines in Argentine production estimates will tighten up the US
and world balance sheets.
Latest news
 Corn: The corn market could face some selling pressure early this week into
the USDA reports on Wednesday due to scheduled index fund rebalancing.
Despite recent rainfall in Argentina the weather situation there remains a
supportive feature for corn prices as moisture deficits persist across many
key production areas. Australian feed wheat remains the most competitively
priced feed grain into Asian markets putting pressure on US corn export
sales. Strong Brazil corn exports is also providing stiff competition with
Brazil’s December customs data showing exports of 1.925mt for the month,
the second highest monthly total on record.
 Soybeans: Preliminary China Customs data for December shows soybean
imports at 5.43mt, down slightly from 5.47mt imported in November. This
takes China’s calendar year 2010 imports to 54.8mt, up 29% y/y. The
Chinese Grain Network has stated it believes China’s soybean imports will
grow by 5-10% per year over the next five years. The market widely believes
that the USDA will lower the Argentine soybean crop forecast in this week’s
report due to recent drought-stress.
 Wheat: Snowfall reached the US southern plains last week with more
expected this week. This will provide needed moisture and protect dormant
wheat from winter-kill. Australia’s wheat harvest continues to deteriorate with
more rainfall in the forecast for southern states this week. This is expected
to interrupt the harvest once again and will likely lead to more damage to
unharvested wheat. Egypt purchased 175,000t of US and Australian soft
wheat over the weekend. Argentine wheat has become the most competitive
origin with port data suggesting good sales to major importers such as
Bangladesh, Morocco and Turkey.