Macquarie Agri-View USDA Planting and Stocks reports – Macquarie Research,

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Macquarie Agri-View
USDA Planting and Stocks reports –
bullish corn demand, bullish soybean area
Report Highlights and Analysis
 The USDA provided a few surprises in today’s Quarterly Grain Stocks report
and Prospective Plantings report, which will likely spur a bullish reaction in the
markets today. First, the USDA provided a 01 March corn stocks estimate 180m
bu below trade expectations. Secondly, the USDA projected US soybean
acreage 800,000 acres below last year and well below market expectations.
Wheat will be a follower after this report due to a much higher than expected
spring wheat planted area projection and a bearish stocks estimate. This report
confirms our bullish Nov11 CBOT soybean view as well as our bullish July/Dec
CBOT corn spread view (see our pre-report estimates released yesterday).
 Corn: Macquarie expects a bullish price reaction to the USDA stocks
report which estimated 01 March corn stocks at 6.52b bu versus the prereport
market expectation of 6.7b bu. US corn stocks fell 15% y/y by 01
March 2011 due to strong ethanol, export and feed demand. We think this
report is particularly bullish on the July/Dec CBOT corn spread as the USDA
corn stocks estimate clearly shows that high corn prices over the past few
months have had little impact on demand. It also suggests demand rationing
will need to occur quickly in order to prevent US ending stocks from falling
below minimum pipeline levels. The spread will also be supported by the
USDA’s corn acreage estimate at 92.2m acres, which is 0.5m acres higher
than market expectations. This will put some pressure on Dec11 CBOT corn
although the market will be aware that there are many weather risks ahead,
which could change this preliminary estimate.
 Soybeans: We think soybeans will be the bullish leader to the upside
today as the USDA slashed projected soybean area and decreased
soybean stocks more than trade expectations. We think the report is
particularly bullish on Nov11 CBOT soybean prices as a 76.6m acre soybean
area and a trend yield assumption would not be sufficient to meet aggregate
US soybean demand growth (export and crush). The USDA reported 01
March soybean stocks at 1.25b bu, down 2% y/y and coming in 50m bu below
trade expectations. The lower than expected soybean stocks are likely the
result of higher than expected February exports and higher residual usage.
 Wheat: Wheat prices will follow corn and soybeans higher today but
both the wheat plantings and stocks estimates were bearish. The USDA,
to our surprise, reported all wheat plantings at 58m acres, nearly 1m acres
higher than pre-report estimates. The surprise comes in spring wheat area,
which is estimated up 5% to 14.4m acres. We find it surprising that spring
wheat acreage would expand so sharply in a context where expected corn
and soybean returns are much stronger in the northern Midwest region.
Nevertheless, this estimate is bearish Minneapolis wheat prices further into
the planting season unless the Canadian spring wheat planting season is
jeopardized by excess moisture conditions. The USDA reported wheat stocks
at the high end of market expectations at 1.42b bu. This stocks estimate
confirms Macquarie’s view that the USDA will eventually increase US wheat
ending stocks closer to 900m bu