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Trade Turns Bearish on S&D Numbers

posted on June 11, 2004

The Chicago Board of Trade is trying to establish a futures contract for Brazilian soybeans starting in 2005. Though some analysts are skeptical of the need, supporters say such a contract would give Brazilian producers and domestic traders a chance to expand into a more global marketplace.

To be sure, most analysts and traders already track the progress of crop production in other countries, as evidenced by the release this week of two closely-watched USDA reports.

Trade Turns Bearish on S&D Numbers The bears were smiling following USDA's release Thursday of its June supply and demand and crop production reports. For starters, USDA predicts world ending stocks for old crop soybeans will increase by 1.3 million metric tons to 33.01 million tons. Forecasters also boosted new crop carryout to 46.69 million tons.

The upshot is the bean market, which has fallen over the past month on demand worries, now has to adjust to increases in supply. The immediate response in the pits was a drop in the nearby futures contract of a nickel. The decline in harvest time contracts was more significant.

USDA left domestic corn ending stocks unchanged for both the current and next marketing years, but raised world carryout for both years. Of more concern to traders were exceedingly low export sales for corn, which in some cases were 90 percent below trade estimates.

The big news in the wheat pit was a lower forecast for the 2004 winter wheat crop, which fell by 20 million bushels. Even so, domestic and world carryout totals were increased, thanks in part to a decline in 2003-2004 U.S. exports. The bearish outlook had some analysts calling for new contract lows in short order.

Tags: agriculture crops markets news USDA