World Agriculture Supply and Demand Estimates recap
USDA’s latest Supply and Demand report’s reduction in yield estimates and supplies has the livestock industries battling ethanol for feed. The reduction in yield estimates removed more than 400 million bushels from an already tight supply/demand balance sheet.
According to the report, U.S. livestock feeders will consume 4.7 billion bushels of corn in the 2011-12 marketing year, which began this month. That’s down 6 percent from 2010- 11 and would be the lowest feed use since 4.68 billion bushels in 1995-96.
Even at lower consumption, the U.S. livestock industry’s corn costs will jump nearly 27 percent to a total of $32.9 billion in 2011-12, based on an average corn price of $7 a bushel, according to USDA data.
Drought conditions and summer heat continue to affect corn yields according to field-surveys. Corn production for 2011/12 is forecast 417 million bushels
lower with expected yields down from last month across most of the Corn Belt. The national average corn yield is forecast at 148.1 bushels per acre, down 4.9 bushels from August and 16.6 bushels below the 2009/10 record. As forecast, this year’s yield would be the lowest since 2005/06. Despite the lower yield, production is expected to be the third highest ever, with the second highest planted area since 1944.
Bryce Knorr, Sr. Editor at Farm Futures Magazine, FarmFutures.com, said the production estimate was still a little higher than he expected. “I think they will subsequently lower that in coming reports,” he said.
Total corn supplies for 2011/12 are lowered 442 million bushels with a 20million-bushel reduction in carryin and a 5-millionbushel reduction in expected imports. Beginning stocks for 2011/12 drop with small increases in 2010/11 exports and use for sweeteners reflecting the latest available data. Imports for 2011/12 are reduced with the smaller forecast corn crop in Canada. Supplies for 2011/12 are projected to be the lowest since 2006/07.
“Livestock feeders are turning to whatever options they have. We are seeing strong buying in wheat,” Knorr said. Unless there is a big collapse in the gasoline/crude market, he expects that trend to hold.
Projected feed and residual use is reduced 200 million bushels mostly reflecting lower expected residual disappearance with the smaller forecast crop. Corn use for ethanol is projected 100 million bushels lower with higher expected corn prices and continued weakening in the outlook for U.S. gasoline consumption as forecast by the Energy Information Administration.
“Ethanol demand is holding strong,” Knorr said.
Corn exports for 2011/12 are projected 100 million bushels lower with increased supplies and exports expected from Ukraine, Argentina, and Brazil. U.S. ending stocks are projected 42 million bushels lower at 672 million. The stocks-to-use ratio is projected at 5.3 percent, compared with last month’s projection of 5.4 percent. The season-average farm price is projected 30 cents per bushel higher on both ends of the range to a record $6.50 to $7.50 per bushel.
Global coarse grain supplies for 2011/12 are projected 3.1 million tons lower with larger barley, sorghum, millet, and oats supplies only partly offsetting the reduction for corn driven by the U.S. changes. Global corn supplies are reduced 4.5 million tons as increases in foreign beginning stocks and production partly offset the reduction in U.S. supplies. Projected global corn production for 2011/12 is lowered 5.9 million tons as a 4.8-millionton increase in expected foreign output is out weighed by the 10.6-million-ton U.S. reduction.
Brazil and Argentina production for 2011/12 are raised 4.0 million tons and 1.5 million tons, respectively, on higher expected area with rising returns for corn in both countries. Ukraine corn production is raised 1.5 million tons based on indications for higher yields. Production is raised 1.0 million tons for EU-27 with higher expected yields in France and several countries in Eastern Europe. Production is lowered 1.0 million tons for Canada based on the latest Statistics Canada estimates. Production is also lowered 2.1 million tons for Egypt as lack of government restrictions on planting resulted in a sharp shift in acreage away from corn and into rice.
“The swing factor is the influence of outside money cause that pushes the curve up or down,” Knorr said.
Global coarse grain trade for 2011/12 is raised slightly with increased foreign trade in barley and corn more than offsetting the reduction in U.S. corn shipments. Barley imports are raised for Saudi Arabia and Syria with larger shipments expected from Ukraine and Russia. Corn exports are raised for Ukraine, Argentina, Brazil, and EU-27. Corn exports are lowered for Canada and Paraguay. Global corn consumption for 2011/12 is lowered 7.3 million tons, mostly reflecting lower expected use in the United States. Foreign corn feeding and consumption are nearly unchanged.
World corn ending stocks are projected up 2.9 million tons with increases in South America, Ukraine, and EU-27 more than offsetting the reduction projected for the United States.
The government cut its forecast of 2011 corn production as expected, but didn’t cut ending stocks much. Instead, economists predict high prices will ration demand and may keep supplies from running out, according to Knorr. “The question is, how high do they have to go,” he added.
2011-2012 Demand and ending stocks Corn: USDA reduced
total use by 400 million bushels, to 12.76 billion bushels. The economists trimmed 200 mb from feed and residual, 100 mb from ethanol, and 100 mb from exports. Carryout dropped to 672 million from August’s 714 mb. The stocksto-use ratio is 5.3 percent, only a touch above the record low of 5.0%. The estimated average price rose from $6.70 to $7.
Soybeans: Looking at soybean usage, crush was left unchanged, exports and residual use rose, and seed fell. Resulting ending stocks were pegged at 165 mb, up 10 million from August, but still 60 mb below old-crop ending stocks. Ending stocks-touse is 5.2 percent, a level that the market is generally comfortable with. The average price estimate rose modestly from $13.50 in August to $13.65.
Wheat: Counter to expectations, all-wheat ending stocks rose to 761 million bushels from August’s 671 mb, 33 percent of expected total use. USDA reduced exports 75 mb and food use 5 mb; left feed and residual use unchanged from August, at 240 mb, versus 133 for the 2010-11 crop year. USDA raised its average price estimate form $7.60 in August to $7.85.
World ending stocks
Corn: Despite a lower world production estimate, global ending stocks of corn rose from August estimates to 117.39 million metric tons, contrary to trade expectations for a reduction to 112.52 mmt. The feed category was reduced 5 mmt.
Soybeans: 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.
Wheat: 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. — Traci Eatherton, WLJ Editor