USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) held no surprises, a welcome relief, according to at least one analyst.
USDA lowered old-crop carryout for corn to 729 million bushels, which was 40 below June’s estimated 769 million but above the average trade guess of 725 million bushels. At the same time, the department raised estimated new-crop carryout to 1.96 billion bushels from last month’s 1.95 billion bushels. July’s new crop carryout was substantially higher than the average trade estimate of 1.9 billion bushels but well within the range of estimates.
"The biggest surprise this report was there were no surprises," sys Johan Ford, senior analyst with Ceres Hedge, Chicago. Ford was the commentator on a post report MGEX press briefing. Previous reports, particularly USDA’s Acreage report released in late June held big surprises, particularly the increase in corn acreage rather than a decrease.
"We will crunch these numbers in and go right back to trading weather," says Ford.
In its June (WASDE) report, USDA notes: "This month’s changes to corn use for 2012-13 and 2013-14 largely reflect the lateness of the 2013 crop and expectations for extremely tight supplies later this summer and into early fall. Feed and residual disappearance for 2012-13 is raised 50 million bushels as early harvest of new-crop corn is expected to be sharply reduced from last year."
USDA left its projected 2013-14 average farm price for corn unchanged at $4.40 to $5.25 per bushel.
It’s hard to make a bullish case for corn prices. "An average yield estimate near 156 bushels per acre is a bit ambitious," says Ford. A yield that high, coupled with current acreage numbers would produce a corn crop near 14 billion bushels.
"There are big numbers overhanging the market," adds Ford. "The 14-billion overhang is a big number to overcome."
With the wide spread between current old-crop corn prices and new-crop prices, Ford recommends that producers sell old-crop corn by the end of this month. After that, buyers will wait until harvest to avoid paying a $2 or $3 premium.
Carryout stocks of soybeans at 125 million bushels were higher than expected but unchanged from last month’s estimate. The average trade estimate has called for only 121 million bushels.
"Soybeans are still vulnerable to an early frost," says Ford. "It would not surprise me if we were overstated on yield."