Beef production estimates up, but still below 2011
The most recent World Agricultural Supply and Demand Estimates (WASDE) report was issued by USDA on Friday, Jan 11. The report showed several good things for beef, such as increased production estimates and reduced import projections, and also a number of surprising things for corn.
Beef and other meat
Overall red meat and poultry production estimates for 2012 were raised, as were projections for 2013. Export estimates for U.S. meat also increased for the balance of 2012— led mostly by increases in 2012 pork export estimates and slightly by larger than expected beef trade. And overall meat import numbers were reduced, this led by reductions in 2012 beef import estimations.
Beef production expectations for the balance of 2012 were raised in the most recent WASDE, from 25.97 billion pounds (bp) to 26.01 bp. Expectations for 2013 were also raised—from 24.68 bp to 24.90 bp—but neither raised estimate reached the 2011 production level of 26.29 bp.
As the number of heads processed has declined and is expected to continue its decline in the near future, most of these production estimate increases go back to the increased carcass weights seen in 2012 and expected to continue this year.
Beef trade estimate changes for 2012 were heartening. Import estimates dropped—from 2.24 bp to 2.23 bp—and export estimates rose 15 million pounds (mp) to 2.48 bp. Additionally, projections of beef imports in 2013 also dropped by 55 mp to 2.57 bp. Though potentially a good thing, 2013 export projections remained static at 2.45 bp, meaning it is still expected the U.S. will become a net importer of beef by volume this year.
Even with these alterations to the expected trade numbers, imports for 2012 and 2013 are looking to be higher than in 2011, while export numbers for both years will be lower than in 2011.
Beef’s 2012 ending stock estimates—and thereby its 2013 beginning stock projections—rose 25 mp to 575 mp. This is lower than both the 2012 and 2011 beginning stocks of 600 mp and 585 mp, respectively.
Anticipated per capita availability of beef for the close of 2012 and for 2013 was mixed. Availability of beef per person for 2012 was reduced slightly to 57.4 pounds, and for 2013, availability is expected to increase a half pound from the earlier projection of 54.9 pounds per person.
The most recent WASDE estimated the annual average price paid for a fed steer in the 5-Area sales increased a cent to $122.86.
Projected prices paid in the first and second quarters of this year are expected to range from $124-130 and $124-132, respectively.
In terms of the meat production world, pork really took center stage in this most recent WASDE. Overall 2012 estimates were increased to 23.27 bp and projections for 2013 pork production rose to 23.3 bp, both above 2011’s 22.78 bp of pork produced. Chicken (broilers) production estimates for 2012 remained static at 36.54 bp and production projections for this year rose to 36.4 bp, but these increased estimations were still below 2011’s chicken production of 36.8 bp.
Trade numbers for pork and chicken weren’t nearly as exciting as beef. All chicken trade estimates remained unchanged from prior reports: 2012 imports at 110 mp, 2012 exports at 7.2 bp, 2013 imports at 112 mp and 2013 exports at 7.05 bp. All chicken trade numbers are above 2011’s import and export levels.
Pork, on the other hand, remained static in terms of import estimates and projections—806 mp in 2012 and 800 mp anticipated for 2013—but increased in export numbers. Pork export estimates for the close of 2012 rose from 5.45 bp to 5.5 bp, and projections of 2013’s pork exports rose 40 mp to 5.49 bps, both figures being above 2011’s 5.19 bp of pork exported.
As with meat overall, expectations are for declining domestic availability of pork and chicken in this year and last compared to 2011, despite report-to-report estimate increases. Per capita pork availability estimates for 2012 were adjusted up slightly to 45.6 pounds per person, and projections for availability in 2013 were raised from 44.5 to 45.6 pounds per person.
Chicken availability estimates for 2012 dropped by a fraction of a pound to 80.3 pounds per person, and projections for 2013 availability rose a pound to 80.1 pounds per person. These were both below 2011’s chicken per capita availability of 82.9 pounds per person.
Corn and other crops
The big news in this most recent WASDE was the changes to the 2012/2013 corn projections. A number of expectations increased or did not decrease to the amount expected, surprising analysts. In general, the markets reacted bullishly with corn following the report, with near-term corn futures gaining roughly 30 cents in the few days after the report’s release.
Corn production projections for the 2012/2013 corn year were mixed, but rose overall compared to the prior WASDE. Area planted increased 300,000 acres to 97.2 million acres (ma) but harvested acres decreased by the same amount to 87.4 ma. Yield estimates increased by over a bushel an acre to 123.4 bushels per acre (bpa). Overall production was increased by 55 million bushels (mb) to 10.78 billion bushels (bb).
This latter point came as a surprise to many analysts as the expectation for this report was that USDA would reduce corn production estimates by 100 mb, not increase it. Much of this surprise came from the known fact more acres planted were cut for silage rather than grain, but analysts had not expected the yield increase, according to CME commentators.
Corn trade estimates were adjusted to reflect the concern over tight supplies and the need to conserve the crop. Imports remained the same at 100 mb—though there is some speculation that will change upward in coming WASDE reports given widespread anecdotal evidence.
“USDA elected to leave its estimate of US corn imports unchanged,” reported CME analysts. “While this may indeed be the case, the estimate may not be realized if the price gap between U.S. and South American supplies disappears, which is already the case. USDA appears to think that as U.S.
corn prices head higher into the spring and summer, we will once again see a notable spread develop and thus more imported corn come into the U.S.”
Export estimates were lowered by 200 mb. The change in export projections has as much to do with the high price of U.S. corn driving potential international buyers off to other sellers as it does with the increased corn use in the feed sector.
Estimates for the “Feed and Residual” category of corn usage were increased by 300 mb to 4.45 bb. CME analysts had an important question about that number.
“The question is: does the final USDA annual feed demand of 4.45 billion bushels reflect the current pace of feed demand AND the fact that broiler producers and hog producers do not seem to be cutting back, but rather are increasing animal numbers?” Food, seed and industrial uses, as well as ethanol and byproducts remained unchained from prior reports at 5.87 bb and 4.5 bb, respectively. The topic of ethanol was something of a non issue in this report, but could warrant attention in the future. According to CME:
“USDA did not change its estimates of US ethanol production. So far, USDA forecasts are in line with the 10 percent reduction in ethanol production. Sharply higher corn prices could lead to further declines in ethanol use and this could offset to a certain degree higher corn use for livestock feed. Gasoline demand and prices remain the big wild card here and will determine the path of ethanol demand for the next two quarters.”
The increased feed usage was not fully offset by the decreased exports nor by the increased yield, so estimates of ending stocks were reduced to 602 mb from 647 mb.
“Additional demand rationing will be required for corn to achieve USDA’s ending stocks forecast,” commented Andrew Gottschalk of Hedgers Edge.
Average annual farm prices received by farmers for corn for the 2012/2013 corn year were left unchanged at $6.80-8/bu.
However, that has the potential to change in future reports as more information regarding feed use trends comes in.
On the world stage, estimates of 2012/2013 corn production increased overall, from 849.09 million metric tons (mmt) to 852.3 mmt.
This increase came from increases in production estimates from Argentina, Brazil and the U.S. However, total domestic feed usage for world corn increased 6.97 mmt, resulting in reduced projected corn exports and ending stock expectations around the world.
Little changed on the domestic market in regards to wheat. Acres planted and harvested remained unchanged from prior reports at 55.7 ma and 49 ma, respectively, and yield estimates remained at 46.3 bpa.
Wheat production estimates for the 2012/2013 year stayed at 2.27 bb.
Food and seed usage for wheat remained mostly static with seed use projections increasing by 2 mb to 75 mb. Feed use estimates rose noticeably, however, from 315 mb to 350 mb. Ending stock projections went down commensurate with the increased usage estimate, leaving it at 716 mb.
Wheat around the world, however, was another story. World wheat production estimates dipped to 654.31 mmt from 655.11 mmt. This drop came mostly from projected production decreases in Australia and the former Soviet Union countries.
World wheat ending stocks were also something of a concern. Gottschalk voiced his worry for the future.
“World ending wheat stocks/use projects to decline despite a large drop projected in world wheat usage of 25 mmt. The size of the projected decline in world wheat usage is suspect. Wheat is the only grain which 2013/14 ending stocks would project a continued decline.” — Kerry Halladay, WLJ Editor