PM Comments 2/10/15
Tuesday, February 10, 2015, 4:02 PM
Submitted by: Eric Kist
The February USDA Supply & Demand report has come and passed, in both its physical release, and in its fundamental impact on the corn and bean markets (Corn dn 3 ¼, beans dn 9 ½). Notable highlights were scarce, but among those worth mentioning were reductions in ending stocks for both corn and soybeans (albeit slight), as a result of increased demand estimates.
Corn ending stocks were reduced by 50 million bushels, from 1.877 to 1.827 billion bushels. Increased ethanol use was the demand driver, as the USDA raised usage for the industry by 75 mbu, citing the EIA’s estimates for increased gasoline consumption in 2015. Consequently, with estimated increased ethanol production, corn usage for feed was lowered by 25 mbu, due to increased DDG production, resulting in a net change in demand of +50 mbu.
Soybean ending stocks were reduced by 25 mbu from the previous S&D report in January. On the supply side, import estimates of soybeans was raised by 10 mbu, which is a surprise of sorts. Conversely, on the demand side of the picture, export estimates and soybean use for crush were also raised, 20 mbu for the former, and 15 mbu for the latter. The net change in ending stocks was a reduction of 25 mbu, lowering the number from 410 to 385 mbu. Also of note, the USDA updated its world soybean balance sheet by reducing its estimate of the Brazilian soybean crop by 1 million metric tons, but at the same time increased its estimate for the Argentina crop by an equal and offsetting amount.
All-in-all, the corn and bean balance sheets still show very adequate supply numbers, and as such, should not change the fundamental picture of the markets.