By GC Mays
The USDA released its weekly export sales report and new export sales were down for wheat, corn, and soybeans. Despite new sales being lower this week a strong bull case exists for soybeans and corn while high wheat ending stocks are bearish for wheat prices. However, the current focus for investors in fertilizer stocks like Mosaic (MOS), Potash Corp (POT), Agrium (AGU) and CF Industries (CF) is on the manufacturer/dealer/retailer supply chain issues and not supply demand fundamentals.
Wheat
New export sales were down for wheat (WEAT) during the week ending April 12th. Sales for the current marketing year fell 19 percent to 366,000 metric tons. Export sales for the 2012/2013 marketing year dipped to 76,300 metric tons, 15.6 percent below a week ago. Compared to a year ago, sales for the next marketing year is 53 percent behind last years pace.
Global political & economic conflict has had a negative impact on wheat exports. Through March 1, exports to the European Union were down 43 percent compared to the previous year due to the European debt crises. That deficit has shrunk to 14 percent since then. The weeks primary export destinations for wheat are as follows:
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Source: The Mays Report
Exports to Africa remain stunted as exports are down by 52 percent. Continuing political strife on the continent has severely reduced or eliminated exports to Egypt, Kenya, Libya and Morocco.
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Source: The Mays Report
Corn
Corn (CORN) export sales of 300,400 metric tons for the 2011/2012 marketing year were also lower, down 69 percent from the previous week. Export sales for the 2012/2013 marketing year were actually negative. The only transaction recorded was a 2,400 metric ton reduction for Mexico. This reduction is interesting as exports to Mexico are up by more than 60% compared to last year due in part to severe drought conditions reducing their corn production to 19 million metric tons from 21 million metric tons in the 2010/2011 marketing year.
This weeks primary export destinations for corn are as follows:
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Source: The Mays Report
Soybeans
New export sales of soybeans (SOYB) totaled 374,300 metric tons and is 19 percent below last weeks total of 460,100 tons. Net sales for delivery during the 2012/2013 marketing year, which begins September 1st was 845,000 metric tons and almost 5 times last weeks sales. US Export sales for the 2012/2013 marketing year are now 9 percent ahead of last years sales pace. This is due to the seemingly continuous falling soybean production levels in South America.
A couple of months ago my chief concern was that US exports were too far behind the previous marketing years pace to catch up because average weekly exports typically drop off dramatically after the end of February. Due to yield issues in South America the pace has held up well.
Source: The Mays Report
Since March 1, weekly exports have averaged just over 725,000, more than twice last years average of 336,000. Despite the uncharacteristic strength in spring exports, US exports to its top 7 markets lag year ago levels.
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Source: The Mays Report
All three crops lag their pace of a year ago. Of the three wheat is only crop not showing gradual improvement. Continuous reductions in soybean production estimates in Argentina give US exporters a chance to make up some ground. The supply chain issues will clear up at or near the end of spring planting season and investors can return their focus to crop supply demand fundamentals.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
