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Allendale Says Biggest Surprise from USDA Is Increase in Corn Exports

Allendale Says Biggest Surprise from USDA Is Increase in Corn Exports

11 February 2014
Allendale Inc.

US - USDA settled the production question with its changes on the January reports; this month was simply an adjustment for demand numbers, reports Rich Nelson, Allendale Chief Strategist.

Allendale Inc

Corn

Supply/Demand: The only change made today was a 150 million bushel increase for exports. This brought ending stocks down from 1.631 billion to 1.481.

The trade will take this news as supportive, as it was far under the 1.619 average guess, but it may not cause a straight up rally. USDA left the corn for ethanol and feed/residual numbers unchanged. Much of the grain trade, and certainly Allendale, warns not to get too bulled up on today’s report for corn.

USDA’s feed/residual numbers are far too optimistic with their current estimate implying a sharp 22% increase over last year. Once that is corrected, which may not be until the April supply/demand report, these stock numbers may rebound to the 1.6 – 1.8 billi

World Numbers: Their Argentine corn production estimate was lowered by 1 million tonne to now 24 mt. That was expected. Brazilian corn production was left unchanged at 70 mt. With some higher feed use numbers for Egypt, the EU, Mexico, and Canada world stocks were lowered from 160 mt down to 157. This is still a good increase over last year’s 134.on range.

Price Expectations: Taking the 1.5 million bushel ending stock at face value, you could suggest a $4.60 to $4.80 upside for old crop corn futures. We do not believe the trade believes this stock level will last though. We do look for corn to continue its slow gains into the month of March. However, we see that as a last chance to sell old and new crop up to $4.80 futures. Our long term downside targets are $3.88 and $3.50 for July and December after planting/development.

Soybeans

Supply/Demand: USDA did respect the strong pace to exports and increase that category by 15 million bushels. That was offset by a change in imports and residual use of the same amount. As it stands today’s ending stock, left at 150 million bushels, may be a disappointment for bulls.


World Numbers:
Despite recent dryness in Brazil USDA raised their crop estimate from 88 million tonnes to now 89. Argentina was lowered by 0.5 mt to 54.0. Soybean stocks on a world basis were increased from last month’s 72 to now 73 mt. Last year’s stocks were 59.

Price Expectations: Allendale forecast suggests a $13 upside target for July soybeans and $12 for November. These prices represent selling opportunities for the long term. Our downside targets, for after planting and early development, are $11.11 for the July and $9.25 for November.


Wheat

Supply/Demand: The trade was expecting a slight decline in ending stocks today, from 608 million bushels to 603. Export sales, year to date, are where they should be to meet their old export number. Today’s increase means they expect exports to strengthen from now into the end of the marketing year (May 31). Small changes to imports and food use offset each other.

World Numbers: Ending stocks were lowered from 185 to 184 million tonnes today. This is still a moderate increase from last year’s 176. This will not change anyone’s price ideas.

Price Expectations: Allendale targets, released at the annual conference, are $6.30 and $6.56 for Chicago wheat futures. After planting, our eventual downside targets are $5.26 and $5.07.

TheCropSite News Desk



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