Friday, May 9, 2008

May 2008 USDA crop forecast shows balanced supply and demand

Commodity brokers are overstating the bullish case in an attempt to extend the rally.

Gavin Maquire, Iowa Grain Co. Research Director:
Declining soybean stocks in the wake of a fairly decent acreage increase in the US ...confirming global consumption is on a rising trajectory.

James Cordier, founder:

Report was extremely bullish for both corn and soybean.
So much of today's corn production goes to ethanol. That's got to have to be revisited.
If we stop ethanol right now corn would sit at 6.25 where we are right now. Corn has a very good chance to go to 7.5 a bushel this fall.
Corn planting is down 50% from previous gestimates. We are looking at corn yields not nearly as high as what we were anticipating just a month ago. That's gonna be very bullish this fall when we actually harvest the crop.

Cordier with more commodity bull(shit) 101:
We have insatiable demand from all the BRIC nations and we see that continuing. To think that we are about to bubble out in commodity prices especially grains any time soon, insatiable demand throughout the world is going to continue for the next 6 to 12 month and it is not too late to participate in it.

Maquire finds some truth:
In wheat we are probably going to head lower.

click for video

To find out what is really going on here are some facts from the USDA's World Agricultural Supply and Demand Estimates:

  • Global wheat production for 2008/09 is projected at a record 656 million tons, up 8 percent from 2007/08, and up 5 percent from the previous record in 2004/05.

  • Total U.S. corn use in 2008/09 is projected down 2 percent as reductions in feed and residual use and exports more than offset a continued expansion in ethanol production. Ethanol use is projected at 4 billion bushels, up 33 percent from 2007/08.

  • Global coarse grains production for 2008/09 is projected at 1.1 billion tons, up slightly from the current year record, despite the year-to-year decline in U.S. corn output. Foreign coarse-grain production is expected to increase 4 percent from 2007/08.

  • Soybean crush ending stocks for 2008/09 are projected at 185 million bushels, up 40 million from 2007/08, leaving the stocks-to-use ratio at a relatively low 6 percent.

  • Global oilseed production for 2008/09 is projected at 423 million tons, up 32.2 million tons from 2007/08.

Supply and demand in U.S. and World corn markets is more balanced than commodity bulls would like us to believe (see red circles):

click to enlarge

USDA's 2008 crop production forecast for the U.S. is bright compared with 2007 with an above average crop for wheat, winter wheat and soybeans. Higher U.S. yield and world production are expected to make up for a slightly lower corn production.

click to enlarge

source: World Agricultural Supply and Demand Estimates, May 2008

source: Crop Production
Released May 9, 2008, by the National Agricultural Statistics Service (NASS)

video: Grow your portfolio with ags

No comments: