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USDA Reports Generally Friendly

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Grain and oilseed futures at the ICE Canada futures market have been mixed since my last column, with canola higher and barley lower. Canola was lifted by gains in the U. S. soy complex, a friendly U. S. acreage report, increased export activity and bullish technical signals. Pakistan and Mexico were both in the canola market. Speculators, including commodity funds, were also good buyers. The gains came despite steady commercial selling and farmer pricing. The rally took cash bids to attractive levels for some farmers and triggered some pricing of contracts. Western barley futures posted losses on sluggish demand. The market ignored the fact that cash bids are above futures contracts and that U. S. corn futures rallied.

Chicago corn and soybean markets rallied as well. Markets were supported by the friendly USDA grain stocks and acreage reports and enthusiasm generated by the seemingly successful conclusion to the G-20 meeting in London. Soybeans drew added support from continued strong demand from the export market and tight farmer holding. Corn futures also rallied on tighter corn supplies, higher crude oil prices, exceptional exports and the government reports. However, old crop corn continued to run into exceptionally heavy farmer selling every time the futures market hit $4/bu. Both soybeans and corn drew support from friendly technical signals which triggered good levels of speculative buying.

U. S. wheat futures posted strong gains. The markets were supported by concerns about the U. S. winter wheat crop, the advances in outside markets including the U. S. stock market and crude oil. The strength in corn and soybeans also stimulated buying. The USDA reports were more neutral for the wheat markets, except for Minneapolis spring wheat.


USDA brought out its first look at U. S. acreage based on actual farm surveys on Mar 31. The numbers were actually quite friendly to the new crop futures. At the same time the USDA brought out its latest quarterly stock reports and they were also quite friendly to the price outlook for the old crop.

The numbers that were most neutral were the wheat numbers, although they contained some positive notes for Canadian farmers. USDA pegged total wheat acres at 58.638 mln, down from last year’s 63.147 mln acres. This would yield a crop of about 2 bln bushels which would mean that the U. S. would lower their wheat stocks and that would be mildly supportive.

However, the most interesting numbers for Canadian farmers came in the estimates for U. S. spring wheat acres, which came in at 13.304 mln, down from last year’s 14.135 mln. Considering that current flooding will also likely cut into spring wheat acres, U. S. production will fall enough to benefit Canadian spring wheat producers.

USDA forecast U. S. durum acres at 2.445 mln, down from 2.731 mln acres. This is also good news for Canadian durum producers. However, both Canadian and U. S. farmers are carrying large stocks of durum in storage and this will limit any major upside in the market, unless significant problems develop in the North African durum crop.


The corn estimates were very friendly for the market. First the Mar 1 quarterly grain stocks came in at 6.958 bln bushels, up from 6.859 bln last year but below trade estimates. This suggests that the pace of usage has been stronger than expected and that ending stocks estimates are likely lower than the Mar. USDA forecast of 1.7 bln bushels. This is positive for the old crop and will keep old crop prices near the $4/bu level.

For the new crop, USDA estimated the acreage at 84.986 mln acres, down from 2008’s 85.98 mln. Lower prices and the high cost of inputs for corn cut the acres. This is quite friendly for the market. Given average yields this would result in a crop of about 12.2 bln bushels.

Consumption of U. S. corn in 2009-10 is expected to be 12.5-12.7 bln bushels. This will pull ending stocks down to the 1 bln bushel level, which is quite tight. It also suggests that new crop corn futures will hit US$5/bu after the harvest. It will also mean the market will be susceptible to weather.

This will supply a positive backdrop to the Canadian barley market and help to lift the barley market in the new crop. We could even see $5/bu barley in 2009-10.


The numbers that were the most surprising came in soybeans. The Mar 1 grain stocks came in at 1.302 bln bushels, down from 1.434 bln at the same time last year. Export demand, notably from China, was thought to have caused the number to be lower. This suggests we will see old crop futures hit the U. S.$10-10.50/bu level, which will support old crop canola.

For the new crop, USDA forecast U. S. planting at 76.024 mln acres, up only slightly from last year’s 75.718 mln acres. The trade had been expecting to see 79-80 mln acres.

Consumption of soybeans in the U. S. in 2009-10 is expected to be about 3.0 bln bushels. This would result in ending stocks of U. S. soybeans climbing to about 400 mln bushels, which is burdensome and suggests that soybean futures could drop to US$8/bu. This would weigh on canola, but canola would likely move to a bigger premium to soybeans because of the tight supplies expected in 2009-10.

With soybean stocks coming into the 2009-10 as tight as they are this market will also be very sensitive to weather problems and any significant reduction in yields would see the soybean market rally quickly back to and above U. S.$10/ bu in the new crop.

Some thing to be aware of is that the USDA acreage report suggests that U. S. farmers will plant 6-8 mln less acres than last year. Grain trade sources and analysts feel that the rally we have seen this spring will probably bring some of those acres back into production.

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