USDA report meets corn expectations, offers surprises

USDA released its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports Monday morning.

USDA trimmed its estimate of national average corn yield to 148.1 bushels per acre from the August estimate of 153 bushels per acre. That’s a slightly greater cut than the average trade estimate, at 148.8. The corn crop was pegged at 12.5 billion bushels from 84.4 million acres harvested while demand dropped off.

“The reduction is not a surprise but the severity of how quickly they are posting poor yields is. The September report indicated the U.S. corn crop would have an average yield of 148.1 bushels per acre. Just two months ago with the July report USDA had pegged the corn yield at 158.7 bushels per acre,” said Doug Tenney, with Leist Mercantile in Circleville. “Corn demand continues to be reduced as the yields have come down the past two months. With the September report, USDA reduced corn demand by 400 million bushels. Corn fed to livestock was reduced 200 million bushels, exports dropped 100 million bushels, while corn used for ethanol was down 100 million bushels. In just two months, USDA has reduced corn demand a total of 750 million bushels. Early calls following the report release had corn up 2-5 cents. Soybeans were thought to be lower, anywhere from 10-20 cents lower.”

Soybean yield raised slightly, to 41.8 bushels an acre from 41.4. However, the crop was trimmed to 3.085 billion bushels from 3.329 billion, with a harvested acreage figure of 73.8 million. This production figure was near the high end of the pre-report range and slightly above average trade expectations of 3.025 billion.

With regard to the 2011-2012 demand and ending stocks USDA reduced total use by 400 million bushels, to 12.76 billion bushels. The economists trimmed 200 million bushels from feed and residual, 100 million bushels from ethanol, and 100 million bushels from exports. Carryout dropped to 672 million from August’s 714 million bushels. The stocks-to-use ratio is 5.3%, only a touch above the record low of 5%. The estimated average price rose from $6.70 to $7.

Looking at soybean usage, crush was left unchanged, exports and residual use rose, and seed fell. Resulting ending stocks were pegged at 165 million bushels, up 10 million from august, but still 60 million bushels below old-crop ending stocks. Ending stocks-to-use is 5.2%, a level that the market is generally comfortable with. The average price estimate rose modestly from $13.50 in August to $13.65.

Counter to expectations, all-wheat ending stocks rose to 761 million bushels from August’s 671 million bushels, 33% of expected total use. USDA reduced exports 75 million bushels and food use 5 million bushels; left feed and residual use unchanged from August, at 240 million bushels, versus 133 for the 2010-11 crop year. USDA raised its average price estimate from $7.60 in August to $7.85.

World ending stocks for corn rose from August estimates to 117.39 million metric tons (mmt), contrary to trade expectations for a reduction to 112.52 mmt. The feed category was reduced 5 mmt.

Likewise, global ending stocks of soybeans rose from 60.95 mmt in August to 62.55 mmt. China’s use — and imports — were left unchanged, at 71.6 mmt and 56.5 mmt, respectively, disappointing the trade, which was looking for increases.

Again, contrary to trade expectations, 2011-12 wheat ending stocks rose from August’s 188.87 mmt to 194.59 mmt. Increased beginning stocks and production more than offset slightly higher domestic use and almost unchanged exports.

Moving forward, the USDA may add another twist for the market in the October report.

“Adding further drama to the supply and demand picture for corn and soybeans is a potential October revision of acres due to reports by the Farm Service Agency (FSA). Preliminary reports from late August suggested both corn and soybean acres could be reduced,” Tenney said. “The corn acres could be reduced near one million acres while soybean acres could be reduced up to 300,000 acres. This is compiled from actual reports by producers to their local FSA offices across the country. Plantings were thought to be reduced from earlier estimates mainly due to wet spring weather along with flooded fields.”

This fall may set up another demand driven situation for 2012.

“Going into the 2011 crop season, it was a given that corn acres would be increased. Since last fall, all have heard how strong demand was and that it would lead to a sharp increase for corn acres,” Tenney said. “With the poor yields for 2011, reports are already surfacing that corn acres for 2012 need to again increase. Early estimates suggest we could need corn acres near 95 million acres.”

 

Complete September 12, 2011 USDA Crop Production Report

 

 

 

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