Agricultural News
Tighter Supplies Predicted by USDA for Soybeans and Corn- Futures Jump in Response
Thu, 11 Oct 2012 08:20:37 CDT
The USDA Crop Production estimates came in about as expected- however the Supply Demand data that was released in a separate report Thursday morning has sparked a Thursday rally in soybean futures. The report from the ERS and the World Outlook Board has suggested what are considered bullish export and crush numbers for soybeans- thus the rally.
Our own Ed Richards visited with Tom Leffler of Leffler Commodities shortly after both reports were released- Click here to jump over to our story where that audio is posted.
First- let's hit the highlights of the October Crop Production Numbers:
Corn production is forecast at 10.7 billion bushels, down slightly from the September forecast and down 13 percent from 2011. This represents the lowest production in the United States since 2006. Based on conditions as of October 1, yields are expected to average 122.0 bushels per acre, down 0.8 bushel from the September forecast and 25.2 bushels below the 2011 average. If realized, this will be the lowest average yield since 1995. Area harvested for grain is forecast at 87.7 million acres, up less than 1 percent from the September forecast and up 4 percent from 2011. Acreage updates were made in several States based on administrative data.
Soybean production is forecast at 2.86 billion bushels, up 9 percent from September but down 8 percent from last year. Based on October 1 conditions, yields are expected to average 37.8 bushels per acre, up 2.5 bushels from last month but down 4.1 bushels from last year. 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. Acreage updates were made in several States based on administrative data.
All cotton production is forecast at 17.3 million 480-pound bales, up 1 percent from last month and up 11 percent from last year. Yield is expected to average 795 pounds per acre, up 5 pounds from last year. Upland cotton production is forecast at 16.6 million 480-pound bales, up 13 percent from 2011. Pima cotton production, forecast at 657,000 bales, was carried forward from last month.
Click here for the complete Crop Production numbers based on October 1, 2012 data.
Turning our attention to the Supply Demand data- these are the numbers that are moving the futures markets higher on this Thursday morning. Soybean futures jumped as the USDA also boosted its demand projections, leading to a forecast for domestic supplies still to be very tight. The USDA forecast that domestic soybean inventories next August, the end of the 2012-13 marketing year, will be 130 million bushels, below the average prediction by analysts of 134 million bushels.
For corn, the USDA cut its domestic inventories forecast to 619 million bushels from 733 million. The projection was lower than the 645 million bushels predicted by analysts, leading futures to rise.
Wheat futures also jumped, following corn higher.
Here are the highlights from the World Agricultural Supply and Demand Report as released by USDA:
Wheat:
Projected U.S. wheat ending stocks for 2012/13 are lowered 44 million bushels as higher feed and residual disappearance more than offsets a reduction in projected exports. Production for 2012/13 is raised 1 million bushels based on the latest estimate from the September 30 Small Grains report. Feed and residual use is projected 95 million bushels higher reflecting the September 1 stocks that indicated higher-than-expected June-August disappearance. Exports are lowered 50 million bushels on the pace of shipments and sales to date and stronger expected competition. Export projections are lowered for Hard Red Winter and Soft Red Winter wheat. The projected range for the 2012/13 season-average farm price is narrowed 15 cents on both ends to $7.65 to $8.55 per bushel. Small revisions to 2011/12 feed and residual disappearance and seed use reflect recent updates to stocks and acreage.
Feed Grains:
U.S. feed grain supplies for 2012/13 are projected lower with reduced carryin and production this month. Corn beginning stocks for 2012/13 are lowered 193 million bushels based on the September 1 stocks estimate. Sorghum beginning stocks are lowered 4 million bushels also on the September 1 stocks. Forecast corn production for 2012/13 is lowered 21 million bushels with higher area more than offset by lower yields. The U.S. corn yield is forecast at 122.0 bushels per acre, down 0.8 bushels from the previous month. Lower yields in Illinois are only partly offset by increases for Minnesota and North Dakota. Forecast sorghum production is raised 6 million bushels with higher yields for Texas and Arkansas. For 2012/13, corn supplies are projected 214 million bushels lower and sorghum supplies are projected 2 million bushels higher. Barley supplies are down 6 million bushels with a small production decline from the Small Grains report and a 5-million-bushel reduction in projected imports with a smaller crop in Canada. Oats supplies are down with a 3-million-bushel reduction in output, also from the Small Grains report.
U.S. corn use for 2012/13 is lowered with a 100-million-bushel reduction in projected exports. 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. Projected ending stocks are raised slightly for sorghum, but lowered for oats. Barley ending stocks are projected 19 million bushels higher reflecting a 25-million-bushel reduction in expected feed and residual use based on indications from the September 1 stocks. 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.
Soybeans:
U.S. oilseed production for 2012/13 is projected at 88.2 million tons, up 6.2 million from last month. Soybean production is forecast at 2.860 billion bushels, up 226 million based on higher harvested area and yield. Harvested area is raised 1.1 million acres to 75.7 million. The soybean yield is projected at 37.8 bushels per acre, up 2.5. Soybean supplies for 2012/13 are projected 10 percent above last month on both increased production and beginning stocks. Peanut and cottonseed production are also projected higher this month.
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.
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.
Cotton:
This month's 2012/13 U.S. cotton supply and demand estimates include slight revisions, resulting in an increase of 300,000 bales in forecast ending stocks. Production is raised 178,000 bales from last month to 17.3 million, due mainly to increases in the Mississippi Delta states. Domestic mill use is unchanged, but exports are reduced based on lower forecast imports by China. The forecast range for the 2012/13 marketing year average price received by producers of 62 to 74 cents per pound is lowered 4 cents on the upper end of the range, reflecting lower prices in recent months. In addition, the final 2011/12 marketing year average price is pegged at 88.3 cents per pound.
A combination of sharply higher production and reduced consumption raises projected 2012/13 world ending stocks by 2.6 million bales this month. Production is raised mainly in India, China, Brazil, Pakistan, and the United States. Consumption is reduced 2.0 million bales for China as the high domestic support price continues to erode offtake. However, about three-fourths of the China reduction is offset by increased spinning use in other countries with access to lower cost raw material, including India, Turkey, Pakistan, Indonesia, Taiwan, and Vietnam. World trade is reduced marginally as a reduction of 1.0 million bales in China's imports is mostly offset by increases for other countries. World stocks are raised to 79.1 million bales, including 37 million bales projected for China.
Livestock, Poultry and Dairy:
The forecast for 2013 red meat and poultry production is raised slightly as higher pork and poultry production more than offsets lower beef production. Lower expected cattle placements in the third quarter will manifest itself as slightly lower supplies of fed cattle in early 2013. The recent Quarterly Hogs and Pigs report estimated a small decline in the June-August pig crop and indicated that producers intend to reduce farrowings through early 2013, but it is expected that continued growth in pigs per litter will mitigate much of the decline in farrowings. The forecast for 2013 poultry production is raised slightly. For 2012, the total meat production forecast is reduced on lower beef and broiler production forecasts, although pork and turkey are forecast higher. Egg production is forecast higher for both 2012 and 2013 based on hatchery data.
Beef imports are reduced for 2012 based on a slower pace of imports from Canada, but are unchanged for 2013. Beef exports are unchanged for 2012 and 2013. Pork exports are unchanged for 2012, but are raised slightly on expected late 2013 improvements in sales. Imports are reduced slightly for 2013. Poultry export forecasts are unchanged for both 2012 and 2013.
Only small changes are made to 2012 livestock and poultry prices, generally reflecting small adjustments to fourth-quarter prices. Cattle and hog prices for 2013 are unchanged, but the broiler price is tightened at both ends of the range and the turkey price is lowered at the high end of the range.
The 2012 milk production forecast is reduced from last month, as slower growth in milk per cow more than offsets a slower expected decline in cow numbers. Higher forecast milk prices in late 2012 and into 2013 are expected to slow the rate of decline in cow numbers and help support higher growth in milk per cow in 2013. Thus, the production forecast for 2013 is raised. Imports are forecast higher for both 2012 and 2013. Fat basis exports for 2012 are lowered but skimsolids exports are forecast higher. Exports for 2013 are unchanged from last month. Product prices are forecast higher for 2012 and 2013 as recent strength in dairy product demand is expected to carry into 2013. Forecasts for butter, cheese, nonfat dry milk, and whey are raised from last month. With higher product prices, both the Class III and Class IV price forecasts are raised. The all milk price is forecast at $18.50 to $18.60 per cwt for 2012 and $19.00 to $19.90 per cwt for 2013.
Click here for the full Supply Demand Report as released by USDA.
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