WASDE Report: Higher U.S. Corn Ending Stocks
Oct 12, 2011
The USDA updated the U.S. and world balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates (WASDE) report today. There were minor changes in this month’s estimates, following the big increase in supplies from the quarterly stocks report at the end of September.
Slightly bearish news from the USDA as corn production declined by 64 million bushels due to a decrease in planted acres of 385,000 and harvested acres of 452,000. Despite the reduced production estimate, this year's crop is still on pace to be the third largest on record. Yields remain unchanged from last month at 148.1 bushels per acre.
U.S. corn beginning 2011/12 stocks increased 208 million bushels due to the increased September 1 quarterly stocks estimate. Due to the 50 million bushel reduction in exports, corn supplies for 2011/12 are now forecasted 144 million bushels higher. Competition for corn exports has increased for the U.S. due to higher expected Black sea production, although the export estimate may be revised next month due to China’s announcement on Tuesday of additional corn exports. Ending corn stocks for 2011/12 were increased by194 million bushels to 866 million bushels. The USDA forecasted the season-average farm price $0.30 lower on both ends of the range to $6.20 to $7.20 per bushel.
Global supplies for 2011/12 increased by 10.4 million tons of which more than half reflecting the 5.3 million ton increase in U.S. corn beginning stocks. Global corn production was raised 5.4 million tons due to foreign increase in production which has more than offset the U.S reduction. China has an estimated increase of 4.0 million tons due to favorable weather and early yield forecasts. Ukraine is also projected with an increase of 3.0 million tons reflecting favorable temperatures and timely precipitation.
The USDA decreased U.S. soybean production by 25 million bushels to 3.06 billion bushels based on decreased harvested acres and yields. Harvested acres were reduced by 147,000 acres to 73.1 million acres. Yields estimates declined by 0.3 bushels per acre to 41.5 bushels per acre.
Exports decreased by 40 million bushels to 1.375 billion bushels due to South American competition. Increased residual use has decreased ending stocks by 5.0 million bushels to 160 million bushels. The U.S. season-average price range for 2011/12 is projected at $12.15 to $14.15 per bushel, a $0.50 decrease on both ends of the range.
Global soybean production has decreased by 0.4 million tons to 258.6 million tons, primarily due to the lower U.S. soybean crop. U.S. soybean exports have declined due to South American competition, but we remain skeptical on South American production due to the potential La Nina weather patterns.
U.S. wheat production declined by 69 million bushels due to a decrease in spring wheat production. Domestic use has decreased by 84 million bushels due to lower feed and residual use as indicated from the September 1 stocks. Imports have increased by 10 million bushels on increased Canada production of Durum and Hard Red Spring wheat. U.S. exports decreased by 50 million bushels due to the U.S. decline in production and increased supplies in Canada, Australia, and Russia. The season-average price is projected at $7.10 to $7.90 per bushel compared with $7.35 to $8.35 last month.
Global supplies are projected at an increase of 5.4 million tons. This is due to Australia's increase in beginning stocks and the increase in production in Kazakhstan, Australia, EU-27, Canada, and South America.
Russian wheat exports have dominated the global market due to undercutting other sellers with low prices. Although Russia has not banned exports as they did last year, they are planning on limiting exports due to nervousness of the U.S. government crop report. If Russia limits their exports, this would increase U.S. wheat exports along with prices.
The increase in U.S corn supplies for the 2011/12 season is a result of demand rationing. China’s rapidly deteriorating inventories may increase 2011 imports to levels above 5 million metric tons. The grain markets will be closely watching China and prices will hang on their every move.
We will get more clarity on harvested acres and yields over the next few weeks as the harvest progresses. We believe the USDA is estimating the best case scenario in their yield estimates,so any unexpected problems with the weather may send prices higher.