By Darin Newsom
DTN Senior Analyst
OMAHA (DTN) -- In what has become my annual lead-in for the March 31 USDA reports, I'll say once again that the more important, but less hyped, data will likely be found in the quarterly stocks numbers.
USDA will release its Prospective Plantings and Quarterly Grain Stocks reports at 11 a.m. CDT Tuesday.
The most-watched number in Tuesday's release will undoubtedly be corn's planting intentions. However, the most important number will almost certainly be soybean quarterly stocks. The average pre-report estimate for soybean stocks on hand as of March 1, 2015, came in at 1.341 billion bushels, with a high end of 1.4 bb and a low end of 1.273 bb. The bottom line is this: If USDA comes in close to the average pre-report estimate, as it did in 2014 (994 mb versus 989 mb), then the U.S. is looking at another year of sub-100 mb ending stocks.
How is this possible given USDA's most recent projection of 385 mb ending stocks? The simple answer is USDA still can't grasp total demand for U.S. soybeans. A March 1 stocks figure of approximately 1.34 bb would imply second-quarter demand of 29% and first-half (of the marketing year) demand of 67.2% of USDA's estimated total supplies of 4.086 bb. While this is less than what has been seen (reportedly) the last two marketing years, 69.3% and 72.2% respectively, it is still much stronger than average going back to 2006-2007 (61.1%).
Using average demand of 32.7% over the second half of the marketing year would essentially erase March 31 stocks on hand. If second-half demand is similar to what was seen in 2014-2015 (25.3%) when ending stocks eventually came down below 100 mb for the first time since 1972-1973, then 2015-2016 ending stocks would be projected at about 300 mb.
As for soybean planting intentions, the average pre-report estimate came in at roughly 85.9 million acres. Keep in mind that this will be USDA'S third release of expected 2015 acres with the first being its baseline estimate of 84 ma and the second being the annual outlook figure of 83.5 ma. Regardless of the outcome, headlines will scream of "Record Soybean Acres," leaving out the idea that this has been a part of the market since last fall and the strong possibility the U.S. will need as many acres as possible to rebuild supplies.
As stated above, much of the post-report hubbub will focus on corn's planting intentions. The average pre-report estimate came in at 88.7 ma, down from USDA's baseline figure of 91 ma and its outlook projection of 89 ma. Knowing full well these acres will change over time (e.g. last year's intentions number of 91.7 ma would eventually be trimmed to the reported 90.6 ma), only an out-of-range third guess by USDA would be likely to cause a long-lasting reaction. The high end of pre-report estimates was 89.7 ma with a low end of 87 ma.
Corn quarterly stocks are almost always more entertaining, particularly if one accounts for the possible appearance (or disappearance) of the ghost 300 mb that has haunted USDA for years. The average pre-report estimate of 7.628 bb implies Q2 demand of 23.1% (of total supplies) and first-half demand of 50.7%. Using average second-half demand back through the 2006-2007 marketing year of 38.3% would result in ending stocks of roughly 1.71 bb, or almost 70 mb below USDA's March estimate of 1.777 bb.
However, what if the ghost 300 mb disappears (production from 2014 overstated?) and USDA's March 1 stocks on hand comes in around 7.3 bb? All of a sudden, the supply-and-demand situation would get much more interesting. If the ghost 300 mb appears (less first-half demand than expected?) and USDA calculates roughly 7.9 bb on hand as of March 1, then ending stocks would once again be projected bearishly close to the 2.0 bb level.
The average pre-report estimate for all-wheat stocks as of March 31 came in at 1.143 bb, implying third-quarter demand of 13.8% of USDA's latest total supply figure of 2.776 bb. If realized, this would be on par with the Q3 demand figures from 2013-2014 and 2009-2010, all well below the 15-year average of 15.3%. Given the snail's pace of U.S. exports, it is likely that USDA comes in between the average pre-report estimate and the high end of 1.2 bb.
Total wheat acres are expected to come in at 55.6 ma as compared to last year's 56.8 ma. Spring wheat acres are expected to see a year-to-year increase from 13.0 ma to just over 13.2 ma.
Editor's note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CDT on Tuesday for an analysis of the Quarterly Grain Stocks and Prospective Plantings reports and a discussion on what they might mean for grain market outlooks. Sign up now at: www.dtnpf.com/promo/webinars.
|QUARTERLY STOCKS (million bushels)
|ACREAGE (million acres)
Darin Newsom can be reached at firstname.lastname@example.org
© Copyright 2015 DTN/The Progressive Farmer. All rights reserved.