USDA Report Not as Bearish as Anticipated

January 11, 2013 09:16 AM

Final 2012 corn production for 2012 was increased 55 million bushels to 10.780 billion bushels, 154 million bushels above expectations. Harvested acres were cut by only 300,000 acres, while yield was increased to 123.4 bpa. Offsetting the higher production was a net 100-million-bushel increase in demand.

Corn for feed use was increased 300 million bushels to 4.450 billion bushels while exports were slashed by 200 million bushels. Corn used in the production of ethanol was left unchanged at 4.50 billion bushels. As a result, overall ending stocks were cut 45 million bushels to 602 million, 65 million bushels below expectations. With today’s report, the market's focus is back on the tight supplies and need to ration demand. Dec. 1 stocks at 8.030 billion bushels were 180 million bushels below expectations, and below the range of estimates. The 2012/13 world ending stocks were cut 1.6 mmt to 116 mmt, the tightest in 6 years. The global stocks/use ratio at just over 13% is the tightest in the 30 years of data I have readily available. Corn production in Argentina/Brazil was raised a combined 1.5 mmt.

2012 soybean production was increased 44 million bushels to 3.015 billion bushels, 16 million bushels above expectations. Harvested acres in soybeans were raised 400,000 acres, while yield was increased to 39.6 bpa. Offsetting the higher production was a 39-million-bushel increase in demand. Crush was raised 35 million bushels to 1.605 billion, while the residual was increased by 4 million bushels. Exports were left unchanged at 1.345 billion bushels. Final ending stocks were raised 5 million bushels to 135 million, in line with expectations. Dec. 1 stocks at 1.966 billion bushels were nearly 20 million bushels below expectations. World ending stocks were cut by .5 mmt to 59.5 mmt. Argentine soybean production was cut by 1 mmt, while Brazilian soybean production was increased by 1.5 mmt.

2013 winter wheat seedings at 41.8 million acres were 500,000 acres above YA, however nearly 1 million acres below expectations. HRW wheat acres at 29.1 million were 1.2 million below expectations, while SRW wheat acres at 9.4 million were roughly 500,000 above expectations. Dec. 1 stocks at 1.660 billion bushels were slightly below expectations. The 2012/13 US wheat ending stocks were cut by 38 million bushels to 716 million, roughly 25 million bushels below expectations. Feed usage was raised by 35 million bushels to 350 million, the highest in 14 years. World ending stocks were left virtually unchanged at 176.6 mmt.

Today’s numbers seem most supportive for corn, as the need to ration demand of last year’s crop continues. This rationing process does appear a bit easier with a mammoth South American harvest about two months away. Stay tuned on their weather here forward. Soybeans are a bit disappointing as today’s report didn’t appear as bearish as the market feared going in. One would have expected a bit more of a price rebound. The market may be anticipating further production increases for the South American crops. While today’s wheat numbers were a bit supportive, $.30 higher seemed like a stretch. It appears the market was bracing for a bearish report and had an initial surge up when it didn’t materialize. Dry conditions in the Southern Plains will still be a concern for KC HRW wheat.

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