Corn, soybean production up, beef down

Markets
Nov 16, 2012

In what has been called neutral to slightly bearish, the most recent USDA World Agricultural Supply and Demand Estimates (WASDE) report was released Friday, Nov. 9. Beef production, imports and exports were lowered compared to the previous report, and corn and soybean yield and production estimates rose for the first time in a long while.

Overall meat and poultry (beef, pork, broilers and turkeys) production estimates were down in the most recent WASDE report. Compared to 2011’s 92.4 billion pounds (bp) of meat and poultry produced, the November estimate for 2012 was 92.16 bp. This was up from the prior report which estimated total production would be 92.04 bp. This gain came from increases in poultry production estimates.

Beef production estimates for both 2012 and 2013 were lowered in the most recent WASDE, and both new production levels are below the 2011 level. Compared to 2011 with 26.3 bp of beef produced, projections for 2012 were reduced by 6 million pounds (mp) to 25.68 bp. The 2013 estimate was also reduced, though on a larger scale. Compared to October’s 2013 beef production estimate, the November estimate dropped 110 mp to 24.62 bp.

Due largely to the effects of high feed prices, low availability, and record-nearing beef prices, the quarterly and annual average prices paid for steers estimate went up. Compared to last month’s expectation of $121.72 being the annual average paid for steers in 2012, November’s report upped the projection to $122.47. The annual average price expectation for 2013 also went up, from $122-132 to $123-133.

Trade expectations for 2012 were lowered in the November WASDE. Last month posted projections of 2.36 bp of beef imported and 2.48 bp of beef exported. Now they are 2.24 bp and 2.47 bp, respectively. The import and export estimates for 2013 were left unchanged at 2.62 bp imported and 2.45 bp exported, still leaving the U.S. as a net importer of beef by volume next year.

The decreased production for this year has shown itself in the decrease in expected beef ending stocks for 2012, down from 575 mp to 540 mp. Endings stock projections for 2013 remained at 550 mp.

Per capita availability expectations also dropped for both reported years, from 57 pounds of beef per person to 56.8 pounds per person for 2012, and from 55.1pounds per person to 54.8 pounds per person in 2013.

Pork and broilers were mixed in how the November WASDE treated them. Pork production estimates declined for both 2012 and 2013—23.28 bp and 22.96 bp, respectively—though even with the projection reductions, both years would have higher production than 2011 with 22.77 bp. Broilers, on the other hand, saw increases in its annual production estimates for both years—36.49 bp and 36.06 bp, respectively—though both would be lower than the 2011 broiler production of 36.80 bp.

Import trade for both pork and broilers was mostly up but mixed. Pork import projections for 2012 fell from October’s estimates of 808 mp imported to 806 mp. Even with this reduction in the estimate, the 2012 pork import numbers would still be higher than the 2011 level of 803 mp. For 2013, the import estimates for pork remained the same at 800 which would be below the 2011 numbers. Broiler import estimates rose for both 2012 and 2013 in the November WASDE—from 101 mp to 110 mp, and from 104 mp to 112 mp, respectively— which would be higher than last year’s 107 mp of chicken imported.

Exports for pork and chicken were all estimated up in the most recent WAS- DE. Pork export projections for 2012 rose 102 mp to 5.45 bp, and rose in the 2013 estimates from 5.39 bp to 5.45 bp. Both of these figures exceed that of 2011 at 5.19 bp. Broiler exports similarly were adjusted upwards in the most recent report, from 7.08 bp to 7.20 bp for 2012 and from 6.95 bp to 7.05 bp in 2013. Again, both of these estimates would be above the 2011 broiler export level of 6.97 bp.

For the most part, pork and chicken availability numbers were readjusted downwards as with beef in this most recent WASDE. Per capita pork availability for 2012 was reduced 0.3 pounds to 45.7 pounds per person, which would put it on par with per capita availability for 2011. For 2013, the per capita availability for pork was estimated down from 45.2 pounds per person to 44.9 pounds per person. Both of these estimates would be at or below 2011’s levels.

Chicken per capita availability estimates rose modestly for 2012—up 0.1 pounds to 80.3 pounds per person—but even with the increase would be below 2011’s availability of 82.9 pounds per person. Projections for 2013 were similarly small, though in the opposite direction, down 0.1 pounds to 79 pounds per person.

Crop projections for corn actually increased for the first time in a long while. Even though increases were modest, this had the effect of depressing corn prices in the markets, which closed slightly down at $7.38’6/bu for December and $7.42/bu.

Per-acre yield projections went up 0.3 bushels to 122.3 bushels per acre (bpa) in the most recent WASDE. According to CME, the increases were higher than expected in pre-report estimates, but not so much so as to be surprising. The increased yield estimates upped the overall production estimates to 10.73 billion bushels (bb), up from 10.71 bb, but CME warned that the numbers could be deceiving given the lack of change in harvested acres.

“It should be noted that acres cut for silage and fodder—a relatively widespread practice this year— are considered ‘harvested’ acres. Given that, USDA’s lack of changes for the harvested acres number is more understandable.”

Import of corn is also expected to rise, from 75 million bushels (mb) to 100 mb, a record-shattering number compared to the next highest record set last year of 29 mb. This massive influx of foreign corn brings the total supply estimate for the 2012/13 year from 11.77 bb in October’s WASDE report to 11.81 bb in the current report. Food, seed and residual usage is expected to increase 17 mb, to 5.87 bb with ethanol usage staying the same at 4.5 bb.

Export plans stayed the same at 1.15 bb. Domestic use projections rose slightly, entirely from the increased food, seed and residual usage, but not enough to keep ending stock estimates from rising from the increased production and import. Despite the increase in ending stock projections, the adjusted level is still among the lowest on record.

“Year-end stocks are now estimated to be 647 million bushels—only 5.8 percent of total usage,” said CME.

“That figure is the third lowest ever—slightly higher than last year’s 5.6 percent and the 5.0 percent of ‘95- ‘96.”

Estimates of average prices paid for corn at the farm dropped from October’s report of $7.10-8.50/bu to $6.95-8.25/bu.

Like corn, soybeans received some upward estimates for the first time in a while. Yield estimates rose from 37.8 bpa in October to 39.3 bpa in the most recent WASDE. This was a whole bushel higher than the average pre-report expectation. This brought the overall production estimates up, from 2.86 bb to 2.97 bb. Imports remained steady at 20 mb, but the increased production allowed crushing estimates to rise—from 1.54 bb to 1.56 bb. Export projections also rose given the greater availability of soybeans, from 1.27 bb to 1.35 bb, and subsequent total use. Ending stocks also got a boost from the increased production, up 10 mb to 140 mb.

Wheat was unchanged in the most recent WASDE report with the exception of export projections, which fell 50 mb to 1.1 bb. This in turn had the effect of decreasing total use estimates and increasing ending stock projections, both by 50 mb. Yield remained at 46.3 bpa, total production was steady at 2.27 bb, and feed and residual use at 315 mb. — Kerry Halladay, WLJ Editor

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