The much-anticipated USDA supply/demand report of this morning came in more or less in line with bearish expectations and therefore did not lead to any additional losses in the market. It looks like anyone who needed to take protection against a bearish scenario had done so over the days leading up to the report.
The US crop came in at 20.66 mio bales, as higher than expected yields from irrigated acres in the Delta boosted the estimate by 314'000 bales. Other than that, US exports and domestic mill use were lowered by 200'000 bales each, which together with an upward adjustment in beginning stocks of 100'000 bales, resulted in ending stocks of 5.4 mio bales, up 0.8 mio bales from last month.
The USDA made some rather astonishing adjustments to last season's statistics. On the one hand, it increased 2005/06 exports by 486'000 bales to 18.04 mio bales, but on the other hand it offset this higher export number by a "negative loss" adjustment of 577'000 bales, which resulted in a 100'000 bales increase in last season's ending stocks.
The USDA apparently blames the Census Bureau for inaccurate numbers on domestic consumption, but needless to say discrepancies of this magnitude are more than a bit disconcerting.
The world numbers are equally uninspiring. As expected, the USDA increased Chinese production in 2006/07 by 1.0 mio bales and it adjusted mill use down by 1.5 mio bales in 2005/06 and by 1.0 mio bales in 2006/07.
On top of that, the USDA increased its already substantial "negative loss" adjustment by 0.85 mio bales in 2005/06 and by 0.5 mio bales in the current season. This "negative loss" translates into higher ending stocks, which increased by 3.85 mio bales compared to last month and are now at 15.14 mio bales.
marketing@alchempro.com
