What Will USDA October Supply and Demand Show?


Crop analysts gathered today for CME Group’s Ask the Analysts panel agreed that  the October USDA supply and demand report tomorrow may be the definitive grains report for the season. Jerry Gidel of Rice Dairy, Jerrod Kitt of The Linn Group and Greg Wagner of GWX Ag Advisors were on a panel on the CME floor today to discuss their outlook for tomorrow’s World Agricultural Supply and Demand Estimates. Though two more reports remain this season, the three panelists suggested the supply and demand for grains may remain static.

“The October production number in (soybeans) is going to be much more meaningful than normal. And that’s just due to the fact that we are 58 percent harvested right now, about 30 percent ahead of normal,” said Kitt. “The USDA has a lot better grasp on how big this crop is, so we could get a much bigger yield projection.”

Kitt put his yield projection for soybeans at 38 bushels per acre.

In a Q&A following the panel’s initial comments, Gidel added “We’re in a situation where after this report is over, the market is going to be in post-harvest mode.   If we see change in Chinese buying, or a change in the ethanol situation, we could see these numbers change.”

Wagner was even more certain. “The production number that comes out will be the definitive adjudicator of crop size, and it will be seen as the best opportunity to get that right.”

Overall, Gidel projects a 90 million bushel decline in carryover stock for wheat in the report, and Wagner noted that analysts are putting corn projections in a range between 119-127 bushels per acre, which will put the United States at a “historically tight” ending stocks level.


Global Demand

Kitt said he would be watching Brazilian and Argentine supply numbers to gauge what the trade balance might be between the United States and South America.

“We’ve effectively had shortages in three major crops,” he said. “So the South America crop becomes important. Every single bushel in the U.S. is going to get used, and most of it is going to be used in the next six months. If we use up too much of our beans or too much of our corn, we are going to be importing those crops from South America.”

When it comes to wheat, Gidel suggested weather conditions this year around the globe may make for a tight wheat supply. “We’ve pretty much extinguished Black Sea demand,” he said. “We’re now moving into some European demand, and into the last half of the year, the world will have to come to the U.S. for wheat.”

He added that the lower corn yields this year mean more farmers are using wheat for animal feed — a fact further tightening wheat supply.


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