Supply and demand possibilities in the May USDA report
click image to zoom The analysis shows very tight soybean stocks if farmers only plant 74 million acres of soybeans and U.S. exports increase as expected. Some relief might come from modestly higher acres in the U.S. this spring and higher acreage and better yields in South America next winter and spring. But at this stage it looks like soybean supplies will be tight and prices will be high for 2012/13.
The outlook for the wheat sector is difficult to project because foreign supplies are a key driver. Exports account for nearly half of total demand. The size of the crops in the FSU, the EU, Canada and elsewhere will be key factors in the U.S. wheat balance sheet. USDA forecast 2012/13 wheat exports of 950 million bushels when they provided their February update and the outlook probably hasn’t changed too much. Wheat acreage for 2012 was put at 56.5 million acres in February, but the estimate in the Prospective Plantings report is 55.9 million. Here is a look at the possible USDA wheat supply and demand projections for 2012/13.
click image to zoom This analysis suggests only a modest increase in wheat ending stocks if U.S. exports come in at the same level as they are expected to for this year. Feed use can swing pretty significantly from year to year depending on the quality of the crop and wheat prices relative to corn prices. Feed use has averaged 180 million bushels over the last four seasons if USDA’s current forecast for 2011/12 is accurate. Changes in the foreign wheat supply and demand balance can have a significant impact on U.S. wheat prices.
Overall the data suggest that USDA’s May forecast will show rising stocks for corn, and probably by a pretty significant amount. Wheat stocks may increase a little, but not by very much and stocks could actually tighten if exports increase a little compared to this year’s total. The data suggest tight soybean stocks for next year, with the potential for stocks to be extremely tight if this year’s U.S. yield falls even a little below trend. Even if acreage is above intentions, the outlook for the soybean sector is very strong. We will find out what USDA thinks on May 10.