And the Survey Says!

By Darin Newsom, DTN Analyst WeD, 14 Aug 2013

Richard Dawson, the exuberant host of “Family Feud” for many years was only slightly less theatrical than USDA with the release of the August round of crop production and supply and demand “answers.”
Picture this situation: You are on the show “Family Feud” and given the question, “What number will be the most bullish in USDA’s August round of reports?” Had you answered “new-crop corn ending stocks,” the crowd would have laughed hysterically at you, anticipating the obnoxious buzzer sound signaling you to be wrong. However, longtime host Richard Dawson might have said, “Survey says: New-crop corn ending stocks is the number one answer!” Shocked silence with a smattering of applause would have filled the studio. That’s pretty much how it went following the release of USDA’s August Crop Production and Supply and Demand reports Monday, the first survey-based look at the newcrop situation. Before the report, I talked about how domestic new-crop corn ending stocks would likely be the most-talked-about number in the pile released by USDA, with little chance of it being bullish. Chatter from most analysts talked of the high likelihood of a number greater than 2.0 billion bushels, despite the pre-report average estimate of 1.97 bb. Lo and behold, when the envelope was unsealed for the rest of the world to see, USDA’s accountants had come up with “only” 1.837 bb. Now, 1.837 bb is not a small number, just smaller than what was expected, so was considered bullish, at least looking at the initial reaction by the market (a rally of 10 cents through Monday’s close). However, the combination of this ending stocks projection with total demand of 12.675 bb results in an ending stocks-to-use figure of 14.5%, the largest since the beginning of corn’s demand-driven market during the 2006-2007 marketing year (a side note, ending stocks-touse for 2005-2006 was estimated at 17.5%). So long-term bullish this is not. As for corn production, planted and harvested acres were left unchanged at 97.4 million acres and 89.1 ma, respectively. National average yield was reduced to 154.4 bushels per acre from the July estimate of 156.5 bpa, resulting in a production projection of 13.763 bb. This was well below the average pre-report estimate of 14.005 bb. The problem for market bulls is that these numbers are all still considered variables, and were most likely written in disappearing ink that vanished before most market watchers had time to do the math. Weather will be the deciding factor, and favorable conditions could possibly push production back over that 14.0 bb hump. Even if it doesn’t, the August estimate remains record large, something that could come back to weigh on the futures market once the hubbub dies down. It is hard to argue that Richard Dawson was not entertaining, with his smooth English accent, penchant for kissing the pretty family members who appeared on the show, and building the “suspense” waiting for answers to come up. But nothing he did will ever match the entertainment USDA does month in and month out with its soybean supply and demand accounting. To paraphrase legendary comic Henny Youngman, “Take soybean ending stocks. Please.” Those who rushed through the report trying to figure out how best to trade need to take a minute, go back and look at the old-crop soybean supply and demand table. Go ahead, I’ll wait. Found it? OK, now look at export demand. This dropped to 1.315 bb from the July estimate of 1.330 bb. Fine, changes happen right? Now pull up last Thursday’s (Aug. 8) weekly sales and shipment report. Got it? Good. See soybeans’ total shipped of 35.843

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million metric tons (as of Thursday, Aug. 1)? That equates to 1.317 bb with another 49 mb of outstanding sales on the books. That means that not only will the U.S. not ship any soybeans over the last four reporting weeks of the marketing year, it will need to see paperwork showing at least 2 mb did not actually get shipped, and have that additional 49 mb rolled over to the next marketing year. A stunningly fascinating quirk of accounting that few noticed. Why was this sleight of hand necessary? Without it, and the miraculous addition of 10 mb of imports, old-crop domestic ending stocks were held above the unofficial floor of 100 mb, staying at the June estimate of 125 mb. This not only served the old-crop situation, but kept new-crop ending stocks above the 200 mb mark and erased USDA’s potential embarrassment of reducing its projection by more than 100 mb in one month’s time. U.S. CROP PRODUCTION (Million Bushels) 2013-2014
Aug Average High

Not that the accounting in new-crop is any less masterful, with exports decreased by 65 mb despite USDA’s own reports showing almost 590 mb has already been sold, additional large sales reported over the last two weeks, and now the projected roll of about 50 mb from old-crop to new-crop. I’d hate to think where I’d be if my accountant worked this way. Wheat was generally forgotten, again, in the August round of reports. Most numbers came in as expected, providing little fodder for traders to get excited about. However, global ending stocks-to-use did come in at 24.5%, down slightly from the July calculation of 24.6% and still the lowest since the 2007-2008 marketing year. This could give market bulls at least some hope that the cumbersome supply situation is slowly becoming a thing of the past. Kind of like the game shows we all used to know.

Low

July

2012-13

Corn Soybeans Grain Sorghum All Wheat All Winter Spring Durum

13,763 3,255 359 2,114 1,543 511 60

14,005 3,336 382 2,106 1,543 506 61

14,348 3,420 391 2,150 1,554 538 80

13,485 3,226 373 1,942 1,510 435 55

13,950 3,420 380 2,114 1,543 513 58

10,780 3,015 247 2,269 1,645 542 82

U.S. AVERAGE YIELD (Bushels Per Acre) 2013-2014
Aug Average High Low July 2012-13

Corn Soybeans Grain Sorghum

154.4 42.6 59.0

157.7 43.6 65.0

161.2 44.5 66.2

155.1 42.5 63.8

156.6 44.5 64.9

123.4 39.6 49.8

U.S. ENDING STOCKS (Million Bushels) 2013-2014
Aug Average High Low July

Corn Soybeans Grain Sorghum Wheat

1,837 220 29 551

1,970 263 33 572

2,431 306 39 653

1,498 131 27 477

1,959 295 30 576

U.S. ENDING STOCKS (Million Bushels) 2012-2013
Aug Average High Low July 2012-13

Corn Soybeans Grain Sorghum

719 125 15

724 123 14

819 135 17

537 109 11

729 125 15

989 169 23

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WORLD ENDING STOCKS (Million metric tons) 2013-14
Aug Average High Low July

Corn Soybeans Grain Sorghum

150.17 72.27 172.99

151.42 74.01 173.12

155.00 76.00 181.11

148.91 72.50 169.70

150.97 74.12 172.38

WORLD ENDING STOCKS (Million metric tons) 2012-2013
Aug Average High Low July 2011-12

Corn Soybeans

123.11 62.22

123.98 61.42

126.00 62.50

122.82 60.25

123.57 61.52

132.42 54.98

WORLD PRODUCTION (Million Metric Tons)
2013-14 2012-13

Aug Australia wheat Canada wheat Argentina corn Brazil corn Argentine soybeans Brazil soybeans 25.50 29.50 27.0 72.0 53.50 85.00

July 25.50 29.00 27.00 72.00 53.50 85.00

Aug 22.08 27.20 26.50 80.00 49.50 82.00

July 22.08 27.20 26.50 77.00 50.20 82.00

DTN Senior Analyst Darin Newsom has more than 20 years of experience following commodity markets and developing riskmanagement strategies. He focuses on how the structure of a market — futures trends combined with price relationships between contracts — indicates what type of market exists and therefore which strategies are appropriate. He can be reached at darin.newsom@telventdtn.com Click here for more from DTN, a CME Group featured contributor. This information was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.

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