Grain and oilseed prices shot up across the board Jan. 12 after the United States Department of Agriculture released its January reports on crop production, supply and demand.
The USDA found smaller soybean stocks, smaller winter wheat acreage and smaller corn stocks than most analysts expected.
It also found stronger than expected demand for corn and wheat.
“Holy smokes! This is great,” said Brenda Tjaden Lepp, an analyst with Mercantile Consulting Venture in Winnipeg.
The USDA reports are considered by many analysts to be the most accurate assessments of American and world grain demand and stocks.
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The USDA found that the record U.S. corn crop was about 200 million bushels smaller than it previously forecast, totalling 10.114 billion bu. It forecast a 24 million bu. decline in 2003-04 U.S. wheat ending stocks, at 559 million bu., and a two million acre reduction in U.S. winter wheat acreage, at 43.46 million acres.
It found 34 million fewer bu. of U.S. soybeans, at 2.418 billion bu., than it had predicted in November, and projected soybean exports to rise by 10 million bu., to 900 million.
Robert Teffaine, a Fimat Canada floor trader at the Winnipeg Commodity Exchange, said the USDA’s finding of short soybean stocks made some buyers step into the market for canola.
Japanese buyers began the canola charge soon after the report came out, followed by commodity funds and grain companies hedging farmer sales.
“The USDA report got the buyers more aggressive,” said Teffaine.
Canola can probably still rise a few dollars, but once it hits $380 per tonne a lot of farmers are likely to start selling, and that may cap short-term prices, he said.
“We’ve taken ourselves to the upper end of the range,” said Teffaine.
Tjaden Lepp said it isn’t clear whether short-term prices will hold up, but this report makes long-term prices look bullish.
“It’s demand driven, that’s why it’s so widespread,” said Tjaden Lepp.
“Demand driven is good news. Don’t sell a thing. Lock up the bins. This is going to be fun.”
Just before the USDA released its report, Egypt announced a major purchase of U.S. and Australian wheat, which encouraged traders.
Seeing good sales of crops gives traders more confidence in being bullish, because rather than speculating that tight stocks will cause prices to rise, they are seeing buyers pay higher prices for the commodity, she said.
“Wheat futures should keep going up and getting better for the next six or eight months. Stocks are very tight,” said Tjaden Lepp.
The USDA predicted the 2003-04 world wheat carryout will be 127.3 million tonnes, a 600,000 tonne drop that takes it even lower than last year’s 165.4 million tonne carryout.
Teffaine said analysts believe that China was watching this report, and if it begins buying because of the perceived shortness of many crops, the market would become bullish.
