10/12: USDA S&D Report Text Highlights

October 12, 2011 02:52 AM

WHEAT: Projected U.S. wheat ending stocks for 2011/12 are raised 76 million bushels as lower  expected domestic use and exports more than offset reduced production. Production is lowered 69 million bushels, mostly reflecting lower spring wheat output as estimated in the September 30 Small Grains report. With tighter domestic supplies and an increase in production in Canada, U.S. imports are raised 10 million bushels, 5 million bushels each for Durum and Hard Red Spring (HRS) wheat. Domestic use is lowered 84 million bushels with seed use reduced 4 million bushels on lower planted area and feed and residual use projected 80 million bushels lower on indications from the September 1 stocks. Despite competitive wheat prices relative to corn for feeders in many areas, wheat feed and residual use during June-August is indicated 53 million bushels lower than the same quarter last year. All wheat food use for 2011/12 is unchanged; however, food use is lowered 15 million bushels for HRS wheat and raised an offsetting amount for Hard Red Winter (HRW) wheat.

U.S. exports for 2011/12 are projected 50 million bushels lower with HRS reduced 40 million and
HRW reduced 10 million. Tighter spring wheat supplies in the United States boost export prospects for Canada and larger exportable supplies in Australia and strong shipments by Russia increase competition in the world market. The season-average price received by producers is projected at $7.10 to $7.90 per bushel compared with $7.35 to $8.35 last month. The higher 2011/12 wheat carryout projection and lower corn prices are both expected to limit seasonal price increases.

Global wheat supplies for 2011/12 are projected 5.4 million tons higher with larger beginning stocks in Australia and higher production in Kazakhstan, Australia, EU-27, Canada, and South Africa. World beginning stocks are raised 2.3 million tons as a 3.2-million-ton increase for Australia (reflecting the latest government stocks estimate) more than offsets numerous, small, downward revisions elsewhere. Kazakhstan production is raised 3.0 million tons based on harvest results that confirm the impact of abundant moisture and near-perfect summer weather on this year's crop. Australia production is raised 1.0 million tons as September rainfall across most of the country's wheat producing areas boosts yield prospects. Production is raised 0.5 million tons for the EU-27 with further upward revisions to official statistics for France and higher reported output in the Czech Republic and Hungary. Production is raised 0.2 million tons each for Canada and South Africa, in line with the latest government estimates.

World wheat trade is raised for 2011/12 as higher expected imports for a number of countries and
larger exportable supplies in major exporting countries support increased trade. Imports are raised 0.5 million tons each for Egypt, Morocco, and Turkey. Smaller increases also are projected for Libya, Thailand, Taiwan, and Tunisia. Exports are raised 2.0 million tons each for Australia and Russia. Exports are raised 1.0 million tons each for Canada and Kazakhstan. Reduced competition from U.S. spring wheat boosts prospects for Canada, while the record crop adds to available supplies in Kazakhstan. World wheat feeding is lowered 4.6 million tons led by the 2.2-million-ton reduction for the United States. Wheat feeding is lowered 2.0 million tons for Russia as exports draw wheat away from domestic use. Wheat feeding is also lowered 1.4 million tons for Australia in part reflecting lower usage indications from the latest official stocks estimate. Global ending stocks are raised 7.8 million tons this month to 202.4 million. As projected, 2011/12 stocks would be a 10-year high.

COARSE GRAINS: U.S. feed grain supplies for 2011/12 are projected higher this month as higher
beginning stocks more than offset lower forecast production. Corn production is forecast 64 million bushels lower with planted and harvested area lowered 385,000 acres and 452,000 acres,
respectively. The national average corn yield forecast is unchanged this month at 148.1 bushels per acre. Beginning stocks for 2011/12 are raised 208 million bushels from the previous projection based on the September 1 stocks estimate. Corn supplies for 2011/12 are forecast 144 million bushels higher. Total U.S. corn use for 2011/12 is projected 50 million bushels lower with reduced exports. Higher expected Black Sea production and exports increase competition for U.S. corn. U.S. ending stocks are projected 194 million bushels higher at 866 million. The season-average farm price is projected 30 cents per bushel lower on both ends of the range to $6.20 to $7.20 per bushel.

Other 2011/12 feed grain changes this month include a 10-million-bushel reduction in projected
sorghum exports and a 10-million-bushel increase in feed and residual use. Barley feed and residual use is projected 10 million bushels lower based on June-August disappearance as indicated by the September 1 stocks and updates to June-August trade. For 2010/11, corn feed and residual use is lowered 197 million bushels based on the September 1 stocks estimate and other changes to 2010/11 use and supplies. Sweetener and starch use is lowered 15 million bushels based on reported use for the June-August quarter. Corn imports are lowered 3 million bushels for 2010/11.

Global coarse grain supplies for 2011/12 are projected 10.4 million tons higher with more than half of the increase reflecting the 5.3-million-ton increase in U.S. corn beginning stocks. Global corn production is raised 5.4 million tons with foreign production increases more than offsetting the U.S. reduction. Production is raised 4.0 million tons for China to a record 182.0 million tons supported by 2011 weather data, information from crop tours, and early forecasts by officials in China. Ukraine corn production is raised 3.0 million tons as summer precipitation and temperature patterns support a sharp year-to-year increase in yield prospects and early harvest results indicate record yields. Production is also raised 0.5 million tons for Russia but lowered 0.3 million tons for Serbia.

Estimates of China’s 2009/10 and 2010/11 corn production are raised 6.0 million tons and 4.2 million tons, respectively, in line with data from the China National Bureau of Statistics (NBS). Based on analysis of summer weather data from China’s northeast corn growing region during the past decade, NBS provincial yield estimates for 2000 through 2008, and the recently released provincial yield estimates for 2010, NBS yields for 2009 are consistent with the historical relationship between yields and reported summer rainfall and temperatures. Summer weather data and the same statistical relationship support this month’s upward revisions to 2010 production. Increases in China corn feed and residual use for 2009/10, 2010/11, and 2011/12 offset this month’s production increases leaving China ending stocks nearly unchanged.

Global coarse grain trade for 2011/12 is raised slightly driven by increased corn imports by South
Korea and higher corn exports from Ukraine and Russia. Exports are raised 2.0 million tons for
Ukraine and 0.3 million tons for Russia with larger crops expected in both countries. These changes more than offset the reduction projected for U.S. shipments. Global corn ending stocks are projected 5.8 million tons higher for 2011/12 mostly reflecting the larger U.S. beginning stocks. Despite the increase, 2011/12 world corn ending stocks would be the smallest since 2006/07.

OILSEEDS: U.S. oilseed production for 2011/12 is projected at 91.6 million tons, down 0.8 million from last month. Soybean production is forecast at 3.06 billion bushels, down 25 million based on lower harvested area and yield. Harvested area is lowered 147,000 acres to 73.7 million. The soybean yield is projected at 41.5 bushels per acre, down 0.3 bushels. Sunflowerseed and canola production are projected lower this month while peanuts and cottonseed production are projected higher.

U.S. soybean exports for 2011/12 are reduced 40 million bushels to 1.375 billion reflecting the slow pace of export sales and strong early season export competition from South America. The
September 1 stock estimate of 215 million bushels indicated higher-than-expected residual use for
2010/11. As a result, the 2011/12 residual use is projected at 32 million bushels, up 9 million from the previous estimate. Soybean ending stocks are projected at 160 million bushels, down 5 million from last month.

Prices for soybeans and products are all reduced this month. The U.S. season-average soybean
price range for 2011/12 is projected at $12.15 to $14.15 per bushel, down 50 cents on both ends of the range. The soybean meal price is projected at $335 to $365 per short ton, down $25 on both ends of the range. The soybean oil price range is projected at 53 to 57 cents per pound, down 2 cents on both ends.

Global oilseed production for 2011/12 is projected at 453.5 million tons, up 0.5 million from last
month. Global soybean production is projected at 258.6 million tons, down 0.4 million mainly due to the lower U.S. crop. Soybean production is raised for India and Ukraine. Offsetting is a small
reduction for Canada based on the latest survey information from Statistics Canada. Global
sunflowerseed production is raised this month based on increased yields for Russia, EU-27 and
Turkey, and increased area in Argentina. Rapeseed production is reduced for Canada based on
lower yields reported in the most recent survey from Statistics Canada. Rapeseed production is also reduced for Russia and Belarus. Other changes include increased peanut production for Argentina, and increased cottonseed production for Brazil. Global oilseed stocks for 2011/12 are increased 0.5 million tons to 73.0 million with soybeans accounting for most of the change.

LIVESTOCK, POULTRY, AND DAIRY: The 2011 forecast of total red meat and poultry production is
raised, reflecting higher beef, pork, and turkey production, but lower broiler production. The increase in beef production is largely due to higher expected cow slaughter as drought conditions in much of the Southern Plains and high hay prices will likely keep slaughter high. Higher than expected thirdquarter commercial hog slaughter supports the higher pork production forecast. Broiler production is reduced as lower egg sets point to a sharp reduction in later-year bird slaughter. However, continued relatively heavy bird weights result in an increase in expected third-quarter production.

Table egg production is increased but is partly offset by lower expected broiler hatching egg production. For 2012, beef and broiler production is reduced from last month, but pork production is increased. Firstquarter beef production is raised slightly but is more than offset by reduced production later in the year as feedlot supplies decline. Broiler production is reduced as broiler price forecasts are weakened.

Pork production is raised from last month. In the Quarterly Hogs and Pigs report, released on September 28, producers indicated they farrowed about 1 percent fewer sows in June–August and intended to keep farrowings near year-ago levels into early 2012. However, the number of pigs per litter continues to grow and is expected to support increased pig crops and supplies of slaughter hogs in 2012.

Beef import forecasts are lowered in 2011 and 2012 as strong demand for beef by competing
importers limits shipments to the United States. The beef export forecast is raised as the strong
demand in a number of countries is expected to support continued growth in U.S exports. Pork
imports are unchanged from last month but the export forecast for 2012 is reduced slightly as
expected increased production in several Asian markets may limit export opportunities later in the year. Broiler exports are raised for 2011 but are unchanged for 2012.

Cattle prices are forecast higher for the remainder of 2011 and through 2012. Demand remains
stronger-than-expected and the strength is expected to carry into 2012. Hog prices are lowered for the last quarter of 2011 and into 2012 as hog supplies and slaughter are forecast higher. Broiler prices are lowered for 2011 as supplies remain relatively large and demand relatively weak. The pace of price recovery in 2012 is expected to be slower than forecast last month.

The milk production forecast for 2011 is raised as the dairy herd has been expanding at a more rapid rate and milk per cow during the summer increased more rapidly than expected. However, the forecast for 2012 is reduced as forecast lower milk prices and weakening milk-feed ratios increase the pace of later year declines in cow numbers. Fat basis exports are lowered for 2011 on slightly weaker butter and cheese exports, but are unchanged for 2012. Skim solids exports are unchanged for 2011 but are lowered for 2012. Import forecasts are unchanged.

Butter and cheese prices for 2011 are forecast lower, but the nonfat dry milk (NDM) price forecast is unchanged and whey prices are forecast higher. International prices have been weaker which has put some pressure on butter and cheese prices. Butter and cheese price forecasts are also reduced for 2012. NDM prices have also been under pressure from weakening international prices and although the forecast for 2011 is unchanged from last month, the price forecast for 2012 is reduced.

Whey prices are raised for both 2011 and 2012 as demand is strong. The Class III price is lowered
for 2011, but for 2012 the higher whey price more than offsets a decline in the cheese price, and the Class III price forecast is raised. The Class IV price is lowered for both years due to lower forecast butter and NDM prices. The all milk price forecast is lowered to $20.00 to $20.10 per cwt for 2011, and $17.75 to $18.65 per cwt for 2012.

COTTON: The 2011/12 U.S. cotton forecasts feature lower exports and higher ending stocks relative to last month. Production is raised 52,000 bales, as increases for several States, especially Georgia, more than offset a decrease in estimated production for Texas. Domestic mill use is unchanged, but exports are reduced due to lower foreign import demand. Ending stocks are now forecast at 3.9 million bales. The stocks-to-use ratio of 25.5 percent is higher than the previous two seasons but well below the 5-year average. The forecast for the average price received by producers of 87.5 to 102.5 cents per pound is narrowed 2.5 cents on each end of the range.

The 2010/11 world cotton forecasts include larger supplies, lower consumption, and higher ending
stocks. Beginning stocks are raised about 900,000 bales, due mostly to prior year revisions for Brazil and Bangladesh. World production is raised 1.2 million bales, as increases for Australia, India, Brazil, Pakistan, and Mali more than offset a reduction for China. World consumption is reduced nearly 850,000 bales, reflecting current sluggish demand and weaker forecasts for world economic growth. With larger production and lower consumption, world trade is reduced 2 percent from last month, including a 500,000-bale decrease in China’s imports. Forecast world ending stocks are raised nearly 3 million bales to 54.8 million. The world stocks-to-use ratio of 48 percent is marginally above the preceding 5-year average.

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