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Focus Turns toward Demand

October 9, 2012
By: Fran Howard, AgWeb.com Contributing Writer
USDA harvested corn
  

Analysts, no doubt, will be watching the corn and soybean production and yield estimates closely when USDA releases its October World Agricultural Supply and Demand Estimates Thursday, Oct. 11. Demand estimates, however, likely will overshadow supply projections.

"There’s starting to be a clear consensus on corn and soybean production and yield, now the question is demand," says Rich Nelson, chief strategist with Allendale, a forecasting and brokerage firm in McHenry, Ill.

Allendale expects USDA to increase planted corn acreage by 400,000 acres while reducing harvested acreage by 1.3 million. The firm expects USDA to increase its average U.S. corn yield estimate from 122.8 to 123.2 bushels per acre. A higher yield coupled with a net reduction in harvested acreage will result in a production estimate of 10.603 billion bushels, down from USDA’s September estimate of 10.727 billion bushels.

Allendale expects USDA to reduce 2012-13 ending stocks for corn to 731 million bushels, down from 733 million bushels in September. The firm calculates that lower demand for new-crop corn from both the feed and export sectors will offset smaller beginning stocks and lower total production.

Allendale expects USDA to drop feed use by 155 million bushels, but Nelson notes that it will take time for the livestock sector to actually cut back usage to that degree. Rationing should be complete by spring, he adds.

Informa, a Swiss-based forecasting firm, anticipates both a higher corn yield and stronger overall production. The firm estimates USDA will increase corn production to 11.194 billion bushels on an average yield increase of 4.2 bushels per acre to 127 bushels.

Both Informa and Allendale expect USDA to increase its estimate for new-crop soybean production. Informa is calling for overall soybean production of 2.86 billion bushels, up from USDA’s September estimate of 2.634 billion bushels. Allendale’s total soybean production estimate for the upcoming report is 2.773 billion bushels.

Both firms anticipate USDA will increase the U.S. average soybean yield from its September estimate of 35.3 bushels per acre. Informa is the more optimistic of the two, estimating USDA will increase the average soybean yield to 37.8 bushels per acre. Allendale puts the yield estimate at 36.9 bushels.

Allendale expects higher soybean demand to partially offset increases of 39 million bushels in beginning stocks and 139 million bushels in overall production. The firm expects USDA to increase ending stocks of soybeans to 137 million bushels from its September estimate of 115 million bushels.

"Soybean exports are fantastic," says Nelson. "USDA’s (2012-13) export goals will be met in the first 5 to 6 weeks of the crop year. The question is how dramatic of a fall in exports do you factor in when South America’s crop comes on line."

South America’s new-crop soybeans will become available for export in March, but orders for the crop will be coming in over the next several months.



Tune into AgWeb next week for pre-coverage of the USDA reports, as well as full report data and analysis on Oct. 11. 

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