USDA’S latest World Agricultural Supply and Demand Estimates held few surprises, but left some analysts wondering what the nation’s livestock producers are feeding their animals. The report gave the trade updated numbers on both U.S. and world production.
“World numbers (for corn, soybeans, and wheat) continue to be bearish, and that will be the black cloud over these markets,” says Randy Martinson, broker with Progressive Ag in Fargo, N.D., and the commentator on an MGEX news conference call following the release of the report November 9. The U.S. numbers were neutral for wheat, slightly bullish for corn, and slightly bearish for soybeans, he says.
“Everyone was looking to see about the re-surveying of the northern states and whether corn and soybean yields would be reduced,” Martinson says. “There was a lot of hype leading up to the report but not much bite.”
Corn for Feed Reduced
The biggest surprise in the entire report, according to Martinson, was a 100 million bushel decrease in U.S. feed and residual use for corn, but no increases were made in feed demand for other crops. USDA attributed the decline to further reductions in the outlook for broiler production, but Martinson was skeptical. “There are some adjustments that will need to be made,” he says.
Chad Hart, economist with Iowa State University, says that USDA expects a significant drop in broiler production in the first quarter of 2012, but whether that actually occurs is yet to be seen.
U.S. corn production of 12.31 billion bushels for 2011-12 was cut by 123 million bushels due to a 1.4-bushel-per-acre decline in the average yield forecast. If realized, the new estimate of 146.7 bushels per acre would be the lowest since the 2003-04 crop year. “Corn production in Iowa increased, but as you move away from Iowa the yields went down for the most part,” says Hart.
U.S. ending stocks were reduced by 23 million bushels to 843 million bushels but the season-average farm price was unchanged at $6.20 to $7.20 per bushel.
Looking at the world numbers, 2011-12 corn production was reduced by 1.1 million metric tons, and feed demand was cut by 1 million metric tons. World ending stocks fell 1.62 million metric tons to 121.57 million, down nearly 6 percent from an estimated 129.04 million metric tons for the 2010-11 crop year.
Argentine growers are expected to produce 1.5 million metric tons more corn this year, while cutting both wheat and soybean production. “They are looking at increasing corn because of potential demand from China,” Martinson notes.
Soybeans Production Down
USDA pegs soybean production at 3.046 billion bushels, down 14 million bushels from its October estimate. The department cut its soybean yield forecast slightly to 41.3 bushels per acre, down 0.2 bushels from last month.
Soybean exports were reduced 50 million bushels to 1.325 billion due to slow export sales through October. Soybean ending stocks are projected at 195 million bushels, up 35 million from last month, but 34 million less than in the 2010-11 crop year. “Stocks are below last year, but we are starting to see stocks increase,” says Martinson.
The midpoint of the U.S. season-average soybean price fell 55 cents to $12.60, while the average soybean meal price fell $25 per ton to $325.
World oilseed production is expected to increase by 1.3 million metric tons from last month’s estimate and soybean production will account for 25 percent of the increase, says USDA, due to higher output in Brazil, Paraguay, and Mexico
Wheat Supplies Lowered
USDA lowered U.S. wheat supplies for 2011-12 by 9 million bushels based on updated production estimates in the northern states re-surveyed following the September 30 Small Grains report. Changes in wheat production in these states, where significant acreage remained un-harvested in early September, reduced production estimates for hard red spring and durum varieties.
U.S. spring wheat was reduced by 7 million bushels, with 5 million of the loss coming from North Dakota alone. “In all it was a small adjustment,” says Martinson.
“We are looking at a short durum wheat crop in the United States,” says Martinson. In North Dakota, Martinson says that production over the last couple of years has only been about half of what it had been in the past. In its latest estimate, USDA cut production of durum wheat by 5 million bushels due to a 0.5-bushel decrease in the state’s average yield, which put total output at 50.5 million bushels, compared with 51.9 million in the previous report.
USDA reduced the 2011-12 U.S. stocks of all wheat by 9 million bushels to 828 million bushels, the result of a 0.2-bushel per acre decline in the U.S. yield of 43.7 bushels per acre. “I’d call the report neutral to wheat,” says Martinson. USDA reduced the midpoint of the season average farm price from $7.50 last month to $7.40 this month.
The department increased global wheat supplies by 2.6 million metric tons reflecting higher wheat output in Kazakhstan and the European Union, but global wheat consumption was increased by 2.4 million metric tons with increased feeding expected for Kazakhstan, Brazil, and Serbia.
Looking ahead, Hart says the two biggest issues facing the markets are persistent sovereign debt problems in Europe that could push the United States into a double-dip recession and a significant lack of soil moisture in Iowa and some other states heading into the winter.
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