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World Agricultural Supply and Demand Estimates Hold Few, If Any, Surprises
14 Mar 07
The USDA's March WASDE report held very little new information, although a 500,000-bale downward revision to U.S. cotton exports puts downward pressure on prices and acreage. What cotton loses in terms of acreage, corn will likely gain. All other crop supply and demand estimates are unchanged for the month.
As should be the case in winter, no new information about the size of U.S. crops was reported in the U.S. Department of Agriculture's March release of its World Agricultural Supply and Demand Estimates (WASDE). The balance sheets for all crops except cotton did not change—not even a little bit. Cotton saw another 500,000-bale cut to the 2006 export projection, now estimated to be 14 million bales, down from 18 million in 2005. Not surprisingly, the loss in exports went to the bottom line, i.e., it will be staying in U.S. warehouses. The USDA estimates that cotton inventories will rise to 8.8 million bales by the end of July. We are rapidly approaching a 50% stock-to-use ratio in cotton, and that is not friendly to prices. Earlier this week, Global Insight issued new acreage projections for 2007 that included a lower cotton area. Today's report reinforces the notion that the risk to this year's cotton area is to the downside, while the risk to corn is to the upside. Global Insight does not anticipate revising its 2007 acreage estimates until after the March "Prospective Plantings" survey figures are released on the last day of the month. Outside the United States, not much changed in the March report. In foreign wheat, India's production was revised up by 1.0 million metric tons and Australia's 2005 production estimate was raised marginally. In coarse grain (feed) production, larger crops in South America were offset by smaller crops in South Africa and Australia, with very little net change. Brazil is projected to harvest a record-large corn crop, leading to a 1.5-million-tonne increase in its exports. Oilseed production in Brazil was increased by 1 million tones, to a record 57 million. The same exceptional growing conditions that favored Brazilian corn production are favoring most all crops, including soybeans. India's cotton production was revised up again this month, although some of the increase was offset by lower production in Australia and Africa. Cotton imports to China remained sluggish in January, causing their annual estimate to be lowered to 14 million bales. by Stewart Ramsey
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