Wednesday USDA reported US ending corn stocks at 1.331 billion bushels in its April supply and demand report, a fundamentally supportive report as the carryout number fell below the average trade estimate of 1.403 billion. The government added 125 million bushels to exports.
Arlan Suderman, Senior Market Analyst at Water Street Solutions thinks there is justification for the increase in corn exports.
“Right now we’re the world’s primary source for corn,” he told HAT, “so traders who normally could get some buyers from the Ukraine are having difficulty doing so now, not because the supply isn’t there, but they’re nervous about writing new contracts with Ukraine and nervous about who they’re going to be doing business with there. So they’re coming to the United States. South American corn is being set aside for the purpose of shipping soybeans right now. Production is down there anyway this year, so the world is coming to our door.”
But he doesn’t think the export numbers represent justification for pushing corn prices higher. That would likely happen only if there is a legitimate threat to this year’s corn crop, and as of this date that threat isn’t there.
For soybeans there was also bullish news. The USDA ending stocks figure of 135 million bushels also fell short of pre-report estimates averaging 4 million bushels more than that. Soybean demand estimates were raised and Suderman disagreed with the way the agency arrived at the increase.
“They raised exports by 50 million. That’s justified. Crush was cut another 5 million and I don’t think that is justified. I think crush needed to go up as well. USDA did raise imports by 30 million and they did cut residual use some, but I think they needed to raise imports more if they’re going to raise demand that much. The cash market has never allowed us to get ending stocks this tight as a percent of annual usage. When you look at this that’s just 4 percent stocks to use ratio. That’s a 14 ½ day supply. The cash market has never allowed soybean stocks to get below a 16 day supply in the last 50 years.”
He says USDA needs to take another look at their math and the marketplace needs to recognize “that we’ve got to pay for more imports to come north.”
For more inside the numbers read Suderman’s closing comments.