Weekly KSU Grain Market Outlook Notes for August 3rd

Weekly KSU notes on corn, grain sorghum, wheat and soybean market trends from a Western Corn Belt / Kansas perspective for the week ending August 3rd, 2012 can be found here.  A connection for the weekly radio program discussing the weekly grain market situation can be found here. The radio program plays live at 10:03 a.m. central time.

Key Corn Supply-Demand Issues:

“Bearish” Short term US Corn Export Shipments (“Uncertain” long term prospects w. drought / rationing affects from high $’s)

–   Weekly Export Shipments wk of 7/26/2012 for MY 2011/12 = 22.9 mb vs 39.9 mb needed to meet USDA’s July 11th projn of 1.600 bb exports

–   Total shipments + sales week of 7/26/2012 for MY 2011/12 = 1.547 bb, i.e., 97% of 1.600 bb USDA projn with 90.4% of MY complete (47/52 wks)

  • In its August WASDE report, the USDA may have to lower “old crop” MY 2011/12 U.S. corn export projections from 1.600 bb by 10-20 mb (due to high prices and some export sales shifting to new crop MY 2012/13)

Ramifications: Higher projected “old crop” MY 2011/12 U.S. corn ending stocks (from 903 mb up to 913-923 mb) and % S/U (from 7.16% up marginally to 7.2%-7.3%)( Secondary effect to 2012 drought)

Market concerns re: short 2012 U.S. corn crop & near record tight “New Crop” MY 2012/13 Supply-Demand

–   USDA July projections of 146 bu/ac & 12.970 bb corn crop in 2012 will likely be reduced

–   Some private analysts projecting 2012 U.S. corn yields as low as 118-130 bu/ac, & 2012 corn production of 10.5-11.5 bb

Ramifications: Tightening “new crop” MY 2012/13 U.S. corn ending stocks from July projn of 1.183 bb down to 600-750 mb range, with S/U ≈ historic minimum of 5.0% (Near or equal to record low of 5.0% S/U in MY 1995/96)

  • How will MY 2012/13 corn use rationed with high prices?
  • Will ethanol use RFS be scaled back by the EPA realized?
  • How much economic damage to U.S. livestock & exports?

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Key Wheat Supply-Demand Issues:

“Neutral-to-Bearish” weekly U.S. Wheat Export Shipments (BUT neutral to bullish longer term outlook) with uncertain wheat & feedgrain production – export prospects in Black Sea region, Eastern EU, U.S., etc.

–   Weekly Export Shipments week of 7/26/2012 for MY 2012/13 = 17.0 mb vs 24.1 mb needed to meet USDA’s July 11th  est. of 1.200 bb exports

–   Total shipments + sales week of 7/26/2012 for MY 2012/13 = 327 mb, i.e., 27% of 1.200 bb USDA projection with 15.4% of MY complete (6/52 wks)

HRS Wheat Harvest Underway / crop in good-OK condition

–   U.S. Spring wheat harvest (28%) > 903% 5ya; 63% good-excellent but down 13-15% in recent weeks (33% p-vp in South Dakota)

World Wheat Supply-Demand Concerns Developing

–  Ongoing World wheat production concerns re: the Black Sea region (Russia, Kazakhstan) and the eastern EU (Poland), tightening World wheat supply-demand balances & likely increasing U.S. wheat exports

–  World wheat supply-demand balance trends (% S/U):

  • MY 2009/10 = 30.9% S/U
  • MY 2010/11 = 30.2% S/U
  • MY 2011/12 = 28.3% S/U (Estimated)
  • MY 2012/13 = 27.2% S/U (Projected)

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Key Soybean Supply-Demand Issues:

“Bullish” Short & Long term U.S. Soybean Export Shipments 

–   Weekly Export Shipments wk of 7/26/2012 for MY 2011/12 = 16.4 mb vs 15.7 mb / week needed to meet USDA’s July 11th projn of 1.340 bb

–   Total shipments + sales week of 7/26/2012 for MY 2011/12 = 1.414 bb, i.e., 106% of 1.340 bb USDA projection with 90.4% of MY complete (46/52 wks)

–   In its August WASDE report, the USDA may have to again raise MY 2011/12 U.S. soybean export projections from 1.340 bb by 20-50 mb

–   Ramifications: Further tightening “old crop” MY 2011/12 U.S. soybean ending stocks (from 170 mb down to 120-150 mb) and % S/U (from 5.46% down to 3.8%-4.7%)

  • 3.8%-4.0% S/U would be a new record low vs 4.45% in MY 2003/04.

 World Soybean Crop Problems in MY 2011/12 & 2012/13

  • Tightening World soybean stocks
    • MY 2007/08 = 22.7% S/U
    • MY 2008/09 = 19.6% S/U***
    • MY 2009/10 = 25.5% S/U
    • MY 2010/11 = 27.9% S/U
    • MY 2011/12 = 20.7% S/U
    • MY 2012/13 = 21.1% S/U

(Likely to be lowered to near 19.6% low from MY 2008/09 in 2012 August, September, &/or October USDA WASDE reports)


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