OMAHA (DTN) -- Heading into Tuesday's USDA Supply and Demand report, market bulls (those that remain) can take heart in the idea that pre-report estimates show the February round of numbers shouldn't lead them to slaughter like the January projections purportedly did.

USDA will release its latest World Agricultural Supply and Demand Estimates report Tuesday. (Logo courtesy of USDA)

A look at the estimates shows that maybe, just maybe, U.S. ending stocks saw their most bearish numbers in January as all four grains (corn, beans, grain sorghum, and wheat) are expected to see a reduction in stocks.

It will be interesting to see where these trimmings come from. For instance, with supply numbers not likely to change, did corn demand increase slightly from last month? If so, where? Ethanol demand should stay steady at 4.2 billion, while feed demand already jumped 150 million bushels in January. That leaves export demand, which is running 8 percent behind the average pace. This means that, in time, instead of 2.05 billion bushels of exports, the U.S. could see 1.886 bb, a sizeable decrease of demand that would likely increase U.S. ending stocks.

The same question can be asked of wheat, with U.S. ending stocks expected to see a modest 3-million-bushel decrease. It is unlikely we will see a feed increase yet, particularly since the January USDA corn supply number didn't seem to acknowledge an abundance of low-quality corn. Also, exports are running 2 percent behind average pace. This means that, in time, export demand projections could drop from 825 mb to 810 mb.

A decrease in soybean ending stocks seems logical given the torrid pace of exports to China. The question is, though, how long demand can stay at this pace as South American harvest progresses and the U.S. dollar index strengthens?

Offsetting the possibility of bullish U.S. ending stocks numbers is the pre-report idea that world ending stocks are expected to show slight increases. Probably the most-watched number will be the world ending soybeans stocks number that is expected to climb above 60 million metric tons for the first time since 2006-07 and only the second time on record. Much of this should be due to increased production estimates in both Brazil and Argentina.

Darin Newsom can be reached at darin.newsom@telventdtn.com

(AG/CZ)

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