WASDE report lowers corn production

Nov 11, 2011

Corn and soybean yields and production were both reduced in USDA’s Nov. 9 World Agricultural Supply and Demand Estimates (WASDE) report, and came in below average from pre-report trade expectations, according to analysts.

USDA’s estimates leave farmers with 843 million bushels of corn at the end of next summer, down from 866 million bushels in last month’s report.

Tight supplies could increase corn prices that have already hit record levels in June on fears of a shortage. The higher corn prices will, in turn, affect food inflation, according to analysts, since corn is used not only as animal feed, but also in a variety of products.

U.S. corn production for 2011/12 is forecast 123 million bushels lower, with the national average yield forecast 1.4 bushels per acre below last month.

“Ending stocks of corn and wheat were lowered from October estimates, though neither as much as pre-report estimates had averaged,” said DTN Senior Analyst Darin Newsom. “Soybean ending stocks increased by 35 mb due to a 50 mb decrease in export demand. Corn and wheat could be viewed as neutral to bearish with soybeans bearish.”

At 146.7 bushels per acre, this year’s yield would be the lowest since 2003/04.

Feed and residual use is lowered 100 million bushels with the smaller crop and further reductions in the outlook for broiler production.

Projected U.S. ending stocks are lowered 23 million bushels. The season-average farm price is unchanged at $6.20 to $7.20 per bushel.

“Ending stocks of corn came in below pre-report expectations and 1.6 mmt less than October and could be viewed as bullish,” Newsom said.

Projected sorghum exports are reduced 10 million bushels as sales and shipments continue to lag earlier expectations. A 10 million bushel increase in expected sorghum food, seed and industrial use is offsetting. Projected farm prices for sorghum are unchanged, but projected ranges are narrowed for barley and oats, and the barley farm price is projected lower based on reported malting barley prices.

Changes for 2010/11 corn mo mostly reflect a 13 million bu bushel increase in food, seed and industrial use with usage raised for sweeteners, st starch, and ethanol, all ba based on the latest available da data.

In addition, there are small adjustments to imports and exports based on August trade data from the U.S. Census Bureau. These changes reduce 2010/11 feed and residual use 11 million bushels.

Global coarse grain supplies for 2011/12 are projected slightly lower with reduced U.S. corn production and lower EU-27 rye production more than offsetting higher Argentina sorghum production, higher EU-27 corn, barley, oats production, and higher Kazakhstan barley production.

Corn production is lowered for a number of countries, with the biggest reduction for Mexico where production is lowered 3.5 million tons. A late start to the summer rainy season and an early September freeze in parts of the southern plateau Corn Belt reduced yields for Mexico’s summer crop.

A lower expected area for the winter crop, which will be planted in November and December, also reduces 2011/12 corn production prospects. Reservoir levels are well below those necessary to sustain a normal seasonal draw down in the northwestern corn areas which normally account for 70 to 80 percent of Mexico’s winter corn crop.

Increases in 2011/12 corn production for a number of countries partly offset reductions in Mexico, the U.S. and Serbia. Corn production is raised 2.5 million tons for China with increases in both area and yields in line with the latest indications from the China National Grain and Oils Information Center. EU-27 corn production is raised 1.9 million tons, mostly reflecting higher reported output in France, Romania and Austria. Argentina production is raised 1.5 million tons with higher expected area. FSU-12 production is raised 0.7 million tons with higher reported yields in Belarus and Russia. There are also a number of production changes this month to corn and sorghum production in Sub-Saharan Africa which reduce coarse grain production for the region.

World coarse grain trade for 2011/12 is raised with increased global imports and exports of barley and corn. Barley imports are raised for Algeria, Saudi Arabia and Jordan, with exports increased for EU-27 and Russia. Corn imports are increased for China, Mexico and South Korea.

Higher expected corn exports from Argentina and EU-27 support these increases. Higher sorghum exports from Argentina offset the reduction in expected U.S. sorghum shipments. Global corn consumption is mostly unchanged, with higher industrial use and feeding in China and higher corn feeding in EU-27 and South Korea offsetting reductions in Mexico and the U.S.

Global corn ending stocks are projected 1.6 million tons lower with reductions in EU-27, Mexico, Brazil and the U.S. outweighing increases for China and Argentina.

U.S. wheat supplies for 2011/12 are lowered 9 million bushels based on updated production estimates for the states resurveyed following the Sept. 30 Small Grains report.

“Wheat ending stocks came in slightly above the October projection and 1 mmt above the average prereport estimate and should be seen as bearish,” Newsom said.

Adjustments to production in these states, where significant acreage remained unharvested in early September, lowers production estimates for Hard Red Spring (HRS) wheat and durum.

An increase in white wheat production is partly offsetting. Projected use for 2011/12 is unchanged for all wheat; however, domestic food use is projected higher for Hard Red Winter (HRW) wheat and lower for HRS wheat.

Projected exports are raised for HRS and lowered for HRW. All wheat ending stocks are lowered 9 million bushels in line with the production change. The season average farm price is projected lower at $7.05 to $7.75 per bushel compared with $7.10 to $7.90 last month, reflecting the latest reported prices.

Global wheat supplies for 2011/12 are projected 2.6 million tons higher, mostly reflecting higher production in Kazakhstan and EU-27. Kazakhstan production is raised 2 million tons as an extended harvest period capped off a nearly ideal growing season, confirmed by the latest government reports. EU-27 production is raised 1.2 million tons with further upward revisions for France and Spain and higher reported production in the United Kingdom and Czech Republic.

Partly offsetting these increases is a 0.5 million ton reduction for Argentina and 0.3 million ton reductions for both Algeria and Ethiopia.

World wheat trade is raised for 2011/12 with higher expected imports for China, along with a number of African countries, including Morocco and Algeria, as well as for Brazil and several FSU-12 countries neighboring Kazakhstan. Partly offsetting is a reduction in projected imports for South Korea where more corn feeding is expected.

Exports are raised 1 million tons each for EU-27 and Russia reflecting larger supplies in EU-27 and the continued heavy pace of shipments from Russia.

Global wheat consumption for 2011/12 is raised 2.4 million tons with increased feeding expected for Kazakhstan, Brazil and Serbia.

Larger crops in Kazakhstan and Serbia support more wheat feeding. Recent rains in southern Brazil have reduced wheat quality in some areas raising the potential for more feeding. Higher consumption is also expected for EU-27, Ethiopia, Kenya and several smaller FSU-12 countries. Global ending stocks are projected 0.2 million tons higher.

Rising stocks in Kazakhstan, China and Morocco are partly offset by reductions in major exporting countries including Russia, Argentina and EU-27.

The 2012 forecast of total red meat and poultry production is reduced from last month. Beef production is reduced due to slightly lower cattle slaughter during the year and slower growth

in carcass weights.

“In the beef numbers, USDA lowered 2011 beef production 33 mil to 26.387 bil lbs. and they lowered 2012 production 65 mil lbs. to 25.07 bil lbs. They raised 2011 imports 20 mil to 2.029 bil and left 2012 imports alone at 2.090 bil lbs. Exports for 2011 were raised 30 mil to 2.765 bil lbs. and 2012 exports were raised 20 mil to 2.775 bil lbs.,” according to Troy Vetterkind, Vetterkind Cattle Brokerage.

Broiler production is forecast lower as sharper declines are expected in bird numbers during late 2011 and into 2012. Turkey production is raised as prices are expected to favor expansion during 2012. Pork production is unchanged.

For 2011, beef and broiler production forecasts are reduced, but pork and turkey production is increased. Egg production is forecast higher in the last quarter of 2011 and for 2012.

The beef import forecast is raised slightly for 2011. Beef export forecasts for 2011 and 2012 are raised slightly as strong global beef demand supports continued gains in U.S. exports to a number of Asian markets.

Small changes are made to U.S. pork imports for 2011 and 2012 and pork exports for 2011. Broiler exports are raised for 2011 and 2012 on strong demand in a number of countries and a relatively weak dollar.

Cattle prices are forecast higher for the remainder of 2011 and through 2012. Strong demand is expected to carry into next year along with tight cattle supplies. Hog prices are raised for 2011 and 2012 on demand strength and support from lower beef and broiler production.

Milk production forecasts for 2011 and 2012 are unchanged from last month.

Commercial exports are forecast higher for 2011. Fat and skim-solids ending stocks for 2011 are lowered.

Cheese, butter and whey prices are forecast higher for both 2011 and 2012, but the nonfat dry milk price forecast is reduced for 2011 and unchanged for 2012. — Traci Eatherton, WLJ Editor