Corn production up on increased yields

Markets
Nov 18, 2013

It seems the U.S. can set records even when projections decline. Corn records, that is.

The big news of the most recent World Agricultural Supply and Demand Estimates (WASDE) report involved the changes to the corn projections. Though the report’s estimated corn production rate for the 2013/2014 crop is up from the previous estimate, the number was still down from prereport trade averages. Soybean production estimates were up compared to pre-report trade expectations.

Corn production estimates rose in the November WASDE compared to the September report (the October report was canceled by the government shutdown) due largely to a sizable increase in yield estimate. Compared to September’s 155.3 bushels per acre (bpa), the November report pegged yields at 160.4 bpa. This was also higher than the pre-report trade estimate of 158.9 bpa. At 160.4 bpa, this year’s crop yield surpasses the record set by the 2009/2010 crop.

The increase in yield projections covered the reductions in area planted and area harvested estimates. Area planted estimates went from 97.4 million acres (ma) to 95.3 ma. Area harvested estimates declined from 89.1 ma to 87.2 ma.

The report attributed the decreased planted and harvested numbers to the crop’s slow start and dryness in July and August. The increased yield, however, was attributed to the cooler summer temperatures and extended growing period in most of corn country.

Altogether, corn production for the 2013/2014 crop was estimated at the record-setting 13.99 billion bushels (bb). This came in on the low end of analyst expectations, most of which projected a crop production over 14 bb. Despite this, Steve Meyer and Len Steiner of the CME Daily Livestock Report said it was to be expected.

“This estimate is very close to the long-term trend yield and was buoyed by excellent yields in the eastern Corn Belt states. It is pretty remarkable that the national crop could handle late planting, extreme wet conditions in some areas and very dry conditions in other and still perform this well.”

In terms of corn trade, import projections stayed steady at 25 million bushels (mb), but export expectations rose from 1.23 bb to 1.4 bb. This increase in export expectations stems from the fact that U.S. corn is growing increasingly competitive on the global market.

Feed and residual corn use was estimated up 100 mb to 5.2 bb. This was attributed to the reduction in prices, which declined 30 cents on either end of the range to $4.10-4.90 for average farm prices. The report itself suggested the additional corn usage would go to livestock—as neither ethanol nor food/ seed use increased— though some took issue with that.

“The feed/residual change must, in our opinion, have something to do with residuals of, perhaps, chicken, since the situations with livestock (and pigs, in particular) and turkey do not support higher feed usage,” said Meyer and Steiner.

“Ending corn stocks versus usage was calculated at 14.6 percent,” said Andrew Gottschalk of Hedgers Edge. “The March corn futures low at $4.26 3/4 has discounted an ending stocks/usage level at 17 percent. The latter level would result from a corn crop size of 14.3 billion bushels. The harvest and seasonal low has likely been scored for this period. That said, world stocks of corn and total grains are set to increase as total production exceeds total grain demand. As such, rallies are expected to be limited and short lived.”

Troy Vetterkind of Vetterkind Cattle Brokerage had a slightly different take on the corn markets.

“Bottom line is we still have a lot of grain coming on the market in coming months. But we can certainly rally the grains a little, especially corn as the funds remain record net short that market.”

Soybean planted and harvested area estimates also declined, but—as with corn—increases to the yield estimate more than covered the losses. With a yield of 43 bpa, the 2013/2013 soybean crop production projections stood at 3.26 bb, this being over 100 mb higher than the September estimate and 37 mb higher than the average pre-report trade estimate.

Soybean meal production was upped to 40.06 million short tons (st) on account of the increase in soybean production. Domestic use remained the same at 29.95 million st. Price estimates increased $15/st to $375-415/st.

Beef and meat

Most things were down in the WASDE report’s meat projections. Production and per capita availability estimates of all meat declined for both 2013 and 2014. Beef projections, however, returned to a net exporter situation.

Beef production for both 2013 and 2014 declined. Estimates for 2013 fell slightly to 25.68 billion pounds (bp) and 2014 projections dropped to 24.17 bp. This compares to pork production estimates of 23.17 bp and 23.78 bp, respectively.

This most recent WAS- DE report was the first to return the U.S. to its traditional role as a net exporter of beef. Import estimates for both years declined while export estimates for 2013 increased and 2014 stayed steady with prior estimates. The November report put 2013 as importing 2.26 bp of beef while exporting 2.46 bp. For 2014, the trade estimate was 2.27 bp imported versus 2.3 bp exported. The estimate changes were based on the current pace of beef trade.

Meyer and Steiner had a more nuanced perspective, saying the decline in imports of beef to the U.S. has to do with “traditional trading partners [focusing] more on markets that pay more and have less red tape.” As one example, China has been buying up Australian beef quite readily, diverting product that might have otherwise come to the U.S.

As with all meat collectively, estimates of per capita beef availability declined for beef. For 2013, the report estimated availability down 0.2 pounds to 56.5 pounds per person. 2014 saw a 1-pound decline with an estimated 53 pounds of beef available per person.

Of the major proteins, chicken was the only one to see any increases in production estimates. Though down in 2013, the projected 2014 production rate was upped to 38.48 bp.

Trade was mixed between pork and chicken.

Pork imports were estimated up for both 2013 and 2014—at 857 million pounds (mp) and 860 mp, respectively—yet export expectations were reduced. The report credited the slow pace of current pork exports, as well as reduced demand projections for Asia. Chicken, on the other hand, saw import expectations stay pat at 115 mp for 2013 and 112 mp for 2014, but saw increased export projections for this year. — Kerry Halladay, WLJ Editor

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