Market Matters Blog
Katie Micik DTN Markets Editor

Friday 05/09/14

Digestion Tough When Deadlines Loom

USDA lockups are the epitome of deadline reporting. When they flip that switch, it's go time. I felt an adrenaline rush on Friday that I hadn't felt since I first started traveling to Washington for the reports nearly two years ago. Has it really been that long? I guess time flies you're having fun and cherish the occasional adrenaline rush.

USDA didn't hand reporters a copy of the numbers until 11:10 a.m. eastern time, leaving 50 minutes to complete my spreadsheets, draft a story and format it correctly for all of DTN's products. I felt my heart beat in my temples, the butterflies flapping in my stomach and broke into a mild sweat.

I barely had time to think about the numbers as I wrote. That "digestion" usually happens on the plane ride back to Omaha. Two things jumped out at me. USDA made one of the larger month-to-month revisions on its old-crop global corn supply and demand table that I've seen in a while, with ending stocks increasing by 10 million metric tons, or 394 mb. The other came from the Crop Production report. Despite the woeful wheat conditions in the Kansas, USDA expects hard red winter wheat production to be slightly higher than last year on increased acreage in the Northern Plains.

USDA's adjustments to the world supply and demand tables' ending stocks numbers have tended to fluctuate by 2 or 3 mmt. An ending stocks jump of 10 mmt in corn is a distinct pattern change. Looking back over the past two months of data (looking at March and April's numbers for 2013-14) show that USDA's increased its global production forecast by 12.5 mmt, with a 6.4 mmt addition in April and a 5.1 mmt addition in May. These gains have come largely from Brazil (5 mmt increase over 2 months), the Former Soviet Union and South Africa.

USDA didn't just increase supply, it trimmed global demand. Feed use forecast declined 1.5 mmt from April. The result was an increase in the old-crop's stocks-to-use ratio from 16.6% in April to 17.8% in May. When you look at the new crop scenario, ending stocks grow to 181.7 mmt and the stocks-to-use figure grows another percentage point to 18.8%.

Now, to wheat. USDA's projection for Kansas's winter wheat crop is nearly identical to the Wheat Quality Council's tour estimate: 260.4 million bushels compared to the tour's 260.7 mb. That's very impressive given the tour's estimate is the average of scouts' individual estimates.

USDA expects hard red winter wheat production to increase to 764 mb from last year's 744 mb. Since Kansas is by far the largest HRW producing state, it's decline should reflect in the broader production estimate, correct? In this Crop Production report, USDA lists "winter wheat" production by state but doesn't break out the differences between HRW and soft red winter wheat specifically. In this case, geography is telling. They don't grow SRW in North Dakota, South Dakota, Montana and Colorado. The varieties grown there are primarily HRW or spring wheat.

USDA forecasts that North Dakota will harvest 3.5 times the number of acres it harvested in 2013 (720 ma vs. 205 ma) and the crop will, on average, yield 3 bushels per acre better. That lifts production from 8.8 mb last year to more than 33 mb. Percentage-wise, that's a pretty dramatic increase.

Montana's HRW production is set to increase 20 mb to more than 100 mb. Colorado's expected to nearly double its production to 84.2 mb from last year's 44.3 mb even with a state average yield of 33 bpa. South Dakota's production is estimated just shy of 50 mb compared to 26 mb last year.

USDA's objective yield data was gathered at the end of April and early May, and crop conditions in the Southern Plains haven't been favorable since then. So the question remains: can the Northern Plains acreage increases and more amenable weather offset the losses in the Southern Plains?

Posted at 6:46PM CDT 05/09/14 by Katie Micik
Comments (3)
3.5 times the acres of spring wheat in north dakota? i didn't finish planting wheat and it will be 3 weeks tomorrow since i turned a wheel. if it doesn't rain any more it will be 7 - 10 days before anything gets done. it is wet from minneapolis to minot and from duluth to bismarck with very little crop planted and much of that needing to be replanted or possibly destroyed. how much wheat do you think will be planted in late may or early june? rumor has it that a lot of corn seed on the books has also been cancelled and soybean seed is getting hard to find in the northern valley. i am going to answer your question with no. the northern plains will not offset losses in the southern plains.
Posted by harlan deike at 10:10AM CDT 05/12/14
That's 3.5 time the number of WINTER wheat acres -- due to all the PP in ND last year. We planted another 500K acres of winter wheat, similar to other high PP years. For wheat overall it is pretty neutral. I suspect most HRWW acres displace HRSW acres. HRSW planting right now is not going well at all. It should crank up later this week if the forecast holds true, but this year is starting to look like a repeat of last year as far as wet weather is concerned. It will get planted, just late. Summer weather will determine the final outcome!
Posted by LeeFarms at 6:53AM CDT 05/13/14
The USDA or the United States Dictatorship of Agriculture- again this corrupt government agency "finds more corn soybeans wheat. This is such a repeat lie,broken record how this corrupt agency can continue to come with their "estimates" and their reports that is always bearish to the American farmer. Last fall when the government shut down, that was such a relief to harvest and enjoy farming the way God intended it, not having to think about another market altering lie from the USDA. Again this is not a fair free market when a government agency controls the market with lies and false unregulated data. In the dictionary control is to exercise restraint or direction; dominate regulate or command. This is not good for farming.
Posted by DAVID/KEVIN GRUENHAGEN at 8:10PM CDT 05/15/14
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