Pro Farmer Extra
- From the Editors of Pro Farmer newsletter
Sept. 28, 2012
USDA cut 193 million bu. from estimated old-crop corn carryover when Sept. 1 corn stocks came in at 988 million bushels. In the Sept. Supply & Demand Report from USDA, carryover was estimated at 1.181 billion bu., so for the first time in years, the "September surprise" in the Grain Stocks Report was bullish for corn prices.
And the bullish price response is completely justified. Sept. 1 stocks of 988 million bu. is 193 million bu. below the last carryover estimate from USDA's World Ag Outlook Board (WAOB), which means beginning stocks for the 2012-13 marketing year will be 193 million bu. smaller than estimated in the Sept. S&D Report. Think about it this way: The 193-million-bu. cut to total supplies is no different than a 2.2-bu.-per-acre cut to the estimated 2012 national average corn yield (at the current harvested acreage estimate of 87.361 million acres.
So the Quarterly Grain Stocks Report released Friday morning was a game changer -- both fundamentally and psychologically. Most likely, the cut to beginning stocks means the 2012-13 corn carryover will be estimated at pipeline levels -- something around 650 million bushels. And that's even if USDA leaves the 2012 crop estimate unchanged from September. If the national average yield is cut - or the harvested acreage estimate is reduced - (or both), then usage cuts will be even deeper to keep estimated carryover near 650 million bushels.
And that should send a strong signal to the market that we simply do not have enough corn for the 2012-13 marketing year and that additional demand destruction is needed to keep corn flowing through a choked-down pipeline.
Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory
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