Corn ending stocks was the biggest surprise this morning as the U.S. Department of Agriculture (USDA) released its July Crop Production Report and its July World Agricultural Supply/Demand Estimate.
Analysts speaking at a teleconference from the floor of the Chicago Board of Trade attributed the unusually low ending stocks number to strong feed demand, slightly higher exports, and above all, a "food vs. fuel" fight shaping up over corn stocks between livestock feeders and ethanol producers.
USDA estimated 2006 corn ending stocks at 1.077 billion bushels, down from the June estimate of 1.091 billion bushels and way down from 2005 ending stocks of 2.176 billion.
In the rest of the Supply/Demand report, USDA figured 2006 soybean ending stocks at 560 million bushels, down from the 655-million-bushel June estimate and 570 million bushels in 2005.
For all wheat, USDA calculated ending stocks of 438 million bushels, up from last month's estimate of 416 million as the hard red winter (HRW) wheat harvest came in a little higher than expected, but still down considerably from last year's 568 million bushels.
In its July Crop Production Report, USDA forecast a 2006 all wheat crop totaling 1.806 billion bushels, down from last year's 2.176 billion.
During the teleconference, Jerry Gidel, associated with North American Risk Management Services, LaGrange, IL, said higher demand for feed and ethanol usage is more than offsetting higher acreage plantings for corn.
Gidel commented that USDA was conservative in estimating U.S. corn yields at 149 bushels per acre (bpa), unchanged from its June 30 acreage report.
Weather conditions as the crop begins its critical pollination stage will determine whether that final yield number goes up or down, he said.
Gidel added later in the teleconference that December 2007 futures prices suggest that U.S. producers will need to find another 3 million acres to plant to corn next year just to maintain a 1-billion-bushel carryover.
Soybean stocks remain ample in spite of a higher crush and higher export numbers, but the analysts said the food vs. fuel fight eventually will affect soybean supplies, as well, as more are diverted into biodiesel production.
In the crop production report for wheat, winter wheat numbers came in higher than expected and spring wheat numbers lower than expected, as higher-than-expected yields in drought-stricken Kansas and Oklahoma were offset by lower expectations in North Dakota due to drought and reduced acreage.
The ending stocks number increased from June, however, due to a higher-than-expected crop shaping up in China.
Analysts also addressed continuing wide basis figures for corn and soybeans, which has been a frequent subject of producer complaints in coffeeshops and grain elevator lounges across the Midwest this year.
Gidel attributed the wide basis to continuing large carryovers, a volatile market keeping some traders on the sidelines, and continued farmer selling on price rallies.
