The USDA released its quarterly grain stocks report today which was seen as bearish for grains as stocks data came in higher than analyst expectations for corn and wheat. Soybeans had a slightly bullish tone as stocks were reported less than expected.
Decreasing demand for corn has been confirmed by the report and rationing is now occurring. USDA reported 1.13 billion bushels on hand for September 1, below last year's 1.17 billion bushels. Analysts estimated 964 million bushels, 164 million bushels less than USDA's findings. Of the total stocks, 315 million bushels are stored on farms, down 35% to last year. Off-farm stocks are at 813 million bushels, down 33% from a year earlier. June-August 2011 disappearance is 2.54 billion bushels, compared to 2.60 billion bushels a year ago. Last year's September stocks were also higher than expected. Analysts speculated early harvested bushels were added to old crop data.
Soybean stocks increased 42% compared to last year with 215 million bushels as of September 1, 2011. Stocks stored on farms totaled 48.5 million bushels, a 37% increase from last year. Off-farm stocks increased to 166 million bushels, up 44% from last September. June-August 2011 disappearance is 405 million bushels, down 4% from last year. Due to USDA stock numbers being higher than analyst expectations (225 million bushels), there could be room for demand to slightly increase.
Wheat stocks decreased 12% from last year with 2.15 billion bushels being reported on September 1, 2011. On-farm stocks are at 642 million bushels, down 21% from last September. Off-farm stocks are down 8% from last year, coming in at 1.51 billion bushels. The June-August 2011 disappearance is 720 million bushels, down 2% from September of last year. These numbers show a bearish outlook for wheat as increased first quarter demand would have implied more usage but usage was down 2% to last September.
Although we would expect corn and wheat prices to drop due to the higher than expected stocks released by USDA, prices remain historically high at over $6.00 per bushel for each commodity. The short-term outlook for corn may be bearish, but we expect that there could be a slight increase in demand to compensate for the higher old crop stocks over the next few months.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.