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Reaction to USDA stocks report
Summary
We highlight our reaction to today’s USDA report, yet another stocks report
that is full of surprises and changes in estimates. We had expected an
increase in corn ending stocks, but stocks at 1,128m/bu is a little surprising.
The big surprise, though, has come on the wheat balance sheet, with stocks
far higher than expected. These numbers imply the large discount for wheat
during the Jun – Aug period did not inspire any increase in feed demand,
which we find shocking.
Our reaction
The USDA increased corn ending stocks for the 10/11 season today by
208m/bu to 1,128m/bu. This is up from the September WASDE report
estimate of 920m/bu. This implies that feed and residual demand was only
412m/bu during the Jun-Aug period. The USDA in the September WASDE
report predicted 10/11 total feed & residual demand at 5,000m bu; this report
suggests this number was actually 4,761m/bu. This change is far larger than
the market had anticipated. In sum the implication from this report is that the
burden of rationing demand in the 11/12 season has eased.
The more surprising change is the large wheat stocks the USDA reported.
The combination of the drop in wheat production to 2,008m/bu and the higherthan-
expected ending stocks at 2,150m/bu implies wheat feeding was far
lower than anticipated. This, in combination with the low estimate for corn
demand, implies that feed demand was low in the Jun-Aug period, which is
surprising given the USDA’s GCAU numbers.
Finally, the bullish element of the report was the shift in the spring wheat
production: the USDA lowered production by 60m/bu to 462m/bu. This was
toward the low end of trade estimates. The shift lower came as the USDA
dropped yields to 38.3 bu/a, down from last seasons 46.1bu/a.
We will be following up with more in-depth analysis of the implications of
today’s USDA report in forthcoming Agri View.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reaction to USDA stocks report
Summary
We highlight our reaction to today’s USDA report, yet another stocks report
that is full of surprises and changes in estimates. We had expected an
increase in corn ending stocks, but stocks at 1,128m/bu is a little surprising.
The big surprise, though, has come on the wheat balance sheet, with stocks
far higher than expected. These numbers imply the large discount for wheat
during the Jun – Aug period did not inspire any increase in feed demand,
which we find shocking.
Our reaction
The USDA increased corn ending stocks for the 10/11 season today by
208m/bu to 1,128m/bu. This is up from the September WASDE report
estimate of 920m/bu. This implies that feed and residual demand was only
412m/bu during the Jun-Aug period. The USDA in the September WASDE
report predicted 10/11 total feed & residual demand at 5,000m bu; this report
suggests this number was actually 4,761m/bu. This change is far larger than
the market had anticipated. In sum the implication from this report is that the
burden of rationing demand in the 11/12 season has eased.
The more surprising change is the large wheat stocks the USDA reported.
The combination of the drop in wheat production to 2,008m/bu and the higherthan-
expected ending stocks at 2,150m/bu implies wheat feeding was far
lower than anticipated. This, in combination with the low estimate for corn
demand, implies that feed demand was low in the Jun-Aug period, which is
surprising given the USDA’s GCAU numbers.
Finally, the bullish element of the report was the shift in the spring wheat
production: the USDA lowered production by 60m/bu to 462m/bu. This was
toward the low end of trade estimates. The shift lower came as the USDA
dropped yields to 38.3 bu/a, down from last seasons 46.1bu/a.
We will be following up with more in-depth analysis of the implications of
today’s USDA report in forthcoming Agri View.
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