9 percent increase in corn use expected

May 11, 2012
by WLJ

USDA increased domestic corn ending stocks for 2011-12 by 50 million bushels from its April estimate, pegging stocks at 851 mb and more than doubling the stocks-touse ratio to 13.7 percent. U.S.

soybean supplies were decreased 40 mb for 2011-12.

USDA released its May Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports last Thursday.

USDA gave its first estimates of 2012-13 crop year supply and demand, pegging U.S. ending stocks for corn at 1.88 billion bushels. Total U.S. corn use for 2012/13 is projected up 9 percent from 2011/12 on higher feed and residual disappearance, increased use for sweeteners and starch, and larger exports. Feed and residual use for 2012/13 is projected up 900 million bushels reflecting a sharp rebound in residual disappearance with the record crop and an increase in feeding with lower corn prices and higher expected pork and poultry production.

USDA estimated 2012-13 domestic soybean ending stocks as 145 mb. USDA also increased its Brazilian corn estimate to 67 million metric tons from its April estimate of 62 mmt in April.

Beef outlook

Total U.S. meat production in 2013 is projected to be above 2012 as higher pork and poultry production offsets what the report predicts as a continued decline in beef production.

Beef production is expected to decline in 2013 due to tighter supplies of fed cattle and lower cow slaughter.

The total meat production forecast for 2012 is raised from last month as production of beef, pork, broiler, and turkey is forecast higher. Beef production is raised on heavier carcass weights and larger expected cow slaughter.

Tight U.S. beef supplies and high cattle prices are expected to constrain beef exports in 2013. Beef imports are expected to be higher in 2012 as U.S. cow slaughter declines in response to reduced cow inventories and increased retention.

The beef export forecast for 2012 is reduced from last month on expected weaker first-quarter exports. Forecasts for subsequent quarters are unchanged. For 2013, cattle prices are forecast above 2012 due to tight supplies of fed cattle.

The cattle price forecast for 2012 is reduced from last month based on recent declines in cattle prices.

2011-12 U.S. ending stocks

USDA estimated corn ending stocks 851 mb, compared to 801 mb in April.

According to pre-report polls, no traders expected USDA to increase ending stocks, and some analysts had expected them to cut ending stocks as low as 660 mb.

“USDA’s domestic ending stocks number of 851 mb, 50 mb above the April number tied to lower feed usage, will leave traders scratching their heads,” said DTN Analyst John Sanow. “Keep in mind, the market doesn’t agree either as indicated by the inverted carry in oldcrop futures spreads and historically firm national average basis. 2012-2013 ending stocks also came in above expectations -- 1.881 bb as compared to the average guesstimate of 1.704 bb. Ending stocks to use in 2012-2013 climb to 13.7 percent, more than double the 6.7 percent in 2011- 2012.”

Soybean ending stocks came in at 210 mb, 40 mb lower than April and toward the low end of trade expectations.

“The end result is a decrease in ending stocks to use of 6.8 percent as compared to the April figure of 8.2 percent,” Sanow said. “In new crop, ending stocks came in at 4.4 percent, representing the tightest level on record.”

Domestic ending stocks for wheat were cut by 30 mb to 768 mb, also slightly lower than the average trade guess.

“Now, the question is what commodity will lead the way, soybeans higher or corn lower?” Sanow said. “And will traders believe the larger old-crop corn number given the market is stating something glaringly different?”

2012-13 U.S. ending stocks

USDA set its initial read of corn ending stocks at 1.88 bb, slightly higher than the average trade guess of 1.7 billion bushels.

U.S. soybean ending stocks tightened considerably. Ending stocks were pegged at 145 mb, within the range of trade guesses.

Wheat ending stocks remain large at 735 mb.

World production and ending stocks

Corn: Global corn stocks increased by roughly 5 million metric tons for 2011-12 to 127.56 million metric tons. Estimated ending stocks grew to 152.4 mmt for the 2012-13 crop year, reflecting the prospect of a large increase in production.

Argentina’s corn output was left unchanged for the current crop at 21.5 mmt. USDA expects Argentina will produce 25 mmt of corn in the 2012-13 year.

Brazil’s corn production was increased by 5 mmt for 2011-12, to 67 mmt. Brazil’s 2012-13 production is estimated at 67 mmt also.

Soybeans: USDA sliced global ending stocks for soybeans for the 2011-12 crop year from 55.52 mmt to 53.24 mmt. It forecasted 2012-13 ending stocks at 58.07 mmt.

“Soybeans were the most interesting of the bunch,” Sanow said. “Despite an expected large increase in world production for 2012- 2013, ending stocks to use is an identical 21.9 percent for both the old-crop and newcrop marketing year.”

Soybean production in Argentina was estimated at 42.5 mmt for the 2011-12 crop year, a 2.5 mmt drop, but USDA expects Argentine farmers will produce 55 mmt in 2012-13.

Brazilian farmers will also have a large crop in 2012-13, with USDA estimates coming in at 78 mmt. USDA slightly trimmed 2011-12 estimates to 65 mmt.

Wheat: Global wheat ending stocks remain burdensome at 188.13 mmt with a stocks-to-use ration at 27.4 percent.

The world ending stocks report should be considered bullish for beans, neutral for wheat and bearish for corn, Sanow said.

Wheat production

USDA estimated that the U.S. will produce 1.7 billion bushels of winter wheat, up 13 percent from last year, with 1.03 bb coming from hard red winter, 42.8 mb coming from soft red winter, and 23 mb coming from white winter wheat. — WLJ