USDA agrees with trade analysts' estimates: Drought has slashed the U.S. corn and soybean crops and strong prices will force domestic and export demand to shrink in the coming year.
"We're clearly going to be in the position where we are going to need big crops in the next year," said Peter Georgantones, account executive at Roy E. Abbott Futures, Inc. "We don't want to see low carryout and drought. That's what we have this year," he said in a MGEX conference call after USDA issued production and supply-demand reports.
Corn futures traded a few cents higher after the report but slipped into negative territory. Soybean futures lost part of their early gains, but stayed higher in the morning.
This year's average corn yield likely will be the lowest since 1995 and the crop will be the smallest since 2006, said USDA. The department projects corn supplies for 2012-13 will fall to a nine-year low and high prices will ration those tight supplies. Total use likely will drop to a six-year low on sharp declines in feed and ethanol demand.
U.S. soybean supplies for 2012-13 are headed toward a nine-year low, forcing exports and crush to drop as season-average projected soybean and produce prices climb to record highs.
"Any way you cut it, we have a massive rationing job ahead of us in soybeans," said Georgantones. "We'll be virtually out of beans."
Corn Acres, Yields Drop
Here are the key USDA numbers for this year's corn crop and balance sheet:
- Harvested area is down 2.5 million acres from last month's estimate to 87.4 million acres, still up from 84 million last year.
- Projected yield of 123.4 bu. per acre is down from 146 bu. projected last month, 166 bu. projected early this year, and 147.2 bu. last year. Trade estimates centered on 126 to 127 bu., but ranged from about 118 to 134 bu.
- The crop of 10.78 billion bushels is down from last month's protection of nearly 13 billion and the 2011 crop of 12.36 billion. USDA's projection is slightly below the average trade estimates of about 11 billion bushels, but well within the range of estimates.
- Feed and residual use in 2012-13 likely will drop to 4.075 billion bushels, down from 4.55 billion estimated this season and 4.79 billion in 2010-11. "We're going to be liquidating animals," said Georgantones. "No one in the country is feeding animals at a profit." He expects cuts in production of hogs, chickens, and turkeys, but doesn't expect USDA's projected corn feeding number to get smaller.
- Exports are projected to fall to 1.3 billion bushels, compared with the estimated 1.55 billion this year and 1.83 billion in 1010-11.
Soybean Crop Prospects Down
Soybean crop prospects may be improving slightly this week in response to rain, said Georgantones, but he still sees a lengthy recovery for U.S. and global supplies.