USDA ESTIMATES BIG YIELD INCREASES... The markets have waited since Sept. 12 for new crop production and supply and demand estimates from USDA. Big increases in corn and soybean crop estimates were expected, and USDA delivered the increase in supply. Average corn and soybean yields even came in above pre-report trade estimates, but the cuts to harvested corn and soybean acres were bigger than trade expectations. The results were bigger corn and soybean crop pegs, but the jump in the corn crop fell short of expectations.
In the S&D Report, USDA’s World Ag Outlook Board showed respect for the recent demand surge and increased both domestic use and export estimates for corn and soybeans. Wheat carryover, however, inched higher as usage estimates fell short of trade expectations. Click here for our full report reaction.
USDA LOWERS 2013 & 2014 BEEF AND PORK PRODUCTION FORECASTS... USDA marginally trimmed its 2013 and 2014 beef production forecast from September to reflect supplies tightening by 5.9% year-over-year. Meanwhile, USDA trimmed its 2013 pork production forecast by 1% from September and lowered 2014 production by 1.6%, though it forecasts a 2.6% year-over-year increase.
The 2014 beef production forecast was reduced slightly from September on lower supplies during 2014. USDA said pork production was reduced from September based on third-quarter data and a lower-than-expected pace of slaughter in October and early November. USDA notes, "In the September Hogs and Pigs Report, producers indicated intentions to expand sows farrowing through early 2014 and increases in farrowings during 2014 will likely be supported by moderating feed costs. However, the 2014 pork production forecast has been tempered by continuing reports of porcine epidemic diarrhea (PED) outbreaks."
Cattle prices for 2013 and 2014 were raised from September to $125.69 and $131.50, respectively, as USDA notes demand for fed cattle is strong. Hog prices for 2013 and 2014 were raised to $64.77 and $61.00, respectively, on tighter-than-expected supplies and firm demand, says USDA.
NON-FARM PAYROLLS SURGED IN OCTOBER... The U.S. dollar index strengthened on better-than-expected jobs data, as the U.S. Department of Labor said 204,000 non-farm payrolls were added in October -- nearly double investors' expectation. Unemployment, however, ticked up from 7.2% to 7.3%. The report states that among the unemployed, the number who reported being on temporary layoff increased by 448,000.
CONAB RAISES BRAZILIAN CROP PEGS... Conab is Brazil’s equivalent of USDA’s National Ag Statistics Service (NASS). As we reported in "First Thing Today," Conab put the Brazilian bean crop at 87.9 MMT to 90.2 MMT (compared to previous estimate of 87.6 MMT to 89.7 MMT). The agency also put the Brazilian corn crop at 78.5 MMT to 79.8 MMT (compared to previous estimate of 78.4 MMT to 79.6 MMT).
The Conab estimates for corn indicate a normal safrinha corn crop, something crop consultant Dr. Michael Cordonnier says is unlikely. As we have previously reported, he sees a big drop in the safrinha corn crop in 2013-14.
WILL PACKERS SLOW THE CATTLE KILL PACE?... There were whispers in the cattle industry last week that packers will soon reduce kill hours in response to tightening feedlot supplies. A slowdown in processing essentially reduces demand for cattle, but doesn’t necessarily slow demand for beef. If this happens, boxed beef prices could trade over $200, but cash cattle bids could drift lower pulling futures down, as well.
A cut to slaughter hours could be the signal to establish short-term hedges. Cattle on Feed Report data suggests cattle marketings are very current. Average kill weights are inching higher, however, with carcass weights at 802 lbs., compared to 794 lbs. last year at this time. That suggests some cattle are spending a few more days on feed.