In short, US stocks are indeed lower than the corresponding year. To put a figure on it, corn stocks are down 36%, soybean stocks are down 51% and wheat stocks down 18%. However, the immediate aftermath of the release saw wholesale heavy selling. Corn and beans recovered a little but continued to grind lower as the stocks report didn’t have the cuts that most in the trade were expecting.
Wheat stocks however, were at the low end of trade estimates and rallied under their own steam. Surprisingly, HRW and WW stocks were adjusted lower, while HRS was higher than the August estimate – albeit coming from a low base.
You could argue, that the substantial erosion of corn and bean stocks would be bullish for the market. However, the market had largely factored in even tighter stocks and was trading lower numbers. When they came in higher than expected, it became evident the market was oversold and needed to correct.
Looking forward, the market will re-evaluate these stock numbers with forecast demand. There is mounting concern that soybean demand in particular will not materialise with China less reliant on US beans. If the dip in prices provides a catalyst for a round of Chinese purchases, maybe the trend is reversed. For now, soybeans, despite their paper thin tightness, appear to have a bearish feel.
Corn to will continue to fluctuate with trade demand and any supply issues. It would not take a yield adjustment lower or a production hiccup to throw corn into the fire.
Wheat will focus on tight major exporter stocks and seeding progress of winter wheats in the Northern Hemisphere. Strong demand for wheat should see prices supported for some time to come.
The week ahead….
Wheat appears to be in control of its own destiny and is not reliant on the dominant row crops for direction. As demand emerges and stocks are drawn down, pricing should remain positive for US futures and global cash markets.