The numbers seemed to be bearish on the surface, but the market liked the outcome of USDA’s October Crop Production and Supply-Demand Reports. In essence, USDA raised harvested acreage for both corn and beans increasing total production, but also raised demand which means the market still has rationing to do.
Corn
USDA’s Crop Production Report for October increased harvested acreage by 300,000 to 87.721 million. Combined with a drop in the national average yield to 122 bushels per acre, that resulted in total estimated production of 10.706 billion bushels. The 122 bushels per acre is 24% below the trend yield for 2012. Lower yields in Illinois are only partly offset by increases for Minnesota and North Dakota. USDA said, “U.S. corn use for 2012/13 is lowered with a 100-million-bushel reduction in projected exports. In the USDA’s World Agricultural Supply and Demand Estimate for October corn exports are lowered based on the slow pace of sales to date and strong competition from Brazil. Corn ending stocks for 2012/13 are projected 114 million bushels lower at 619 million, which is 5.6% of use. The season-average farm price for corn is lowered 10 cents on both ends of the range to $7.10 to $8.50 per bushel based on early season cash and futures prices and prices available for forward delivery through early 2013.”
The harvested acreage estimate of 87.721 million acres, is close to the 87.4 million forecast in September, in an effort to balance production to meet demand. However, that sets up the opportunity to refine the harvested acres number in the November report. Since 90% of the crop was mature when the survey was taken, there will be less possibility of yield adjustments than acreage adjustments in the November and January reports.
Globally, “coarse grain supplies for 2012/13 are projected 11.0 million tons lower mostly reflecting reduced corn beginning stocks in the United States and Brazil. Brazil beginning stocks are lowered with 2011/12 exports increased 4.5 million tons. Global corn production for 2012/13 is lowered 2.0 million tons with reductions for EU-27, Serbia, and the United States. Global 2012/13 corn exports are lowered 1.1 million tons this month with the U.S. reduction partly offset by a 1.0-million-ton increase for Brazil and a 0.5-million-ton increase for India. Imports for EU-27 are raised 2.0 million tons with the smaller crop. Global corn feeding is down 1.4 million tons.” Global corn stocks are now at a 50 day supply, the tightest in 39 years, and over half of it is in China.
Domestic corn use includes a 100 million bushel cut in exports to 1.150 billion bushels, both ethanol use at 4.5 billion and feed and residual use at 4.150 billion remained constant. USDA also removed 193 million bushels from beginning stocks, based on the September Stocks estimate released late last month. The total use of 11.150 billion bushels compared to 10.706 billion in production was is the first shortfall of its kind in the past 38 years for both corn and beans.
Soybeans
USDA’s Soybean production estimate placed the crop at 2.860 billion bushels, compared to the 2.634 billion in September, which was a result of a 2.5 bushel per acre increase in the national average yield to 37.8 bushels per acre. Harvested acreage was estimated at 75.693 million, up from 74.6 million in September, a 1.1 million acre increase. USDA said, “Compared with last month, yield forecasts are higher or unchanged across all States. Area for harvest in the United States is forecast at 75.7 million acres, up 1 percent from September and up 3 percent from last year.”
The 226 million additional bushels of soybeans will be used, and not parked into carryover. USDA said, “U.S. soybean exports for 2012/13 are raised 210 million bushels to 1.265 billion reflecting increased supplies, lower prices, and the record pace of export sales through early October.
Soybean crush is raised 40 million bushels to 1.540 billion mostly due to increased soybean meal exports and increased soybean supplies. Soybean crush is also supported by an increase in domestic disappearance of soybean oil which reflects the impact of the increase of the biodiesel mandate for 2013 recently announced by the Environmental Protection Agency. Soybean ending stocks are projected at 130 million bushels, up 15 million from last month.”
With soybean demand remaining at high levels, USDA’s increased production numbers indicates the market still has a considerable amount of rationing to do, with prices returning to higher levels.
Regarding prices, USDA said, “Prices for soybeans and products are all reduced this month. The U.S. season-average soybean price range for 2012/13 is projected at $14.25 to $16.25 per bushel, down $0.75 on both ends of the range. The soybean meal price is projected at $470 to $500 per short ton, down $15 on both ends of the range. The soybean oil price range is projected at 53 to 57 cents per pound, down 1 cent on both ends.”
Globally, USDA reported, “Revisions to the world 2012/13 oilseeds estimates include reduced soybean exports for Brazil and Argentina, increased soybean imports for China and Mexico, and increased soybean crush for Argentina, China, and Mexico. Global oilseed stocks for 2012/13 are increased 3.6 million tons to 64 million. Soybeans account for most of the change, with higher stocks in Argentina, Brazil, China, and the United States.”
By Stu Ellis