USDA September Supply & Demand Text Highlights

September 12, 2012 02:50 AM

WHEAT: The 2012/13 U.S. wheat balance sheet is unchanged this month; however, small by-class adjustments are made to projected exports and stocks. Projected exports for Hard Red Winter wheat are lowered 25 million bushels with Hard Red Spring and White wheat exports raised 15 million bushels and 10 million bushels, respectively. Corresponding changes are made to projected ending stocks for these three classes. The projected range for the 2012/13 season-average farm price is lowered to $7.50 to $8.70 per bushel compared with $7.60 to $9.00 per bushel last month. Prices reported for the summer months, when producers typically market nearly half the crop, have remained well below cash bids and futures prices, suggesting substantial forward pricing by producers earlier in the year.

Global wheat supplies for 2012/13 are projected 3.1 million tons lower mostly due to lower expected production in Russia. An increase in foreign beginning stocks partly offsets the projected 4.1-millionton reduction in world wheat output. Beginning stocks are raised for Canada and Egypt, but lowered for Argentina. Production for Russia is reduced 4.0 million tons with lower reported area and reduced yields as harvest results confirm additional drought and heat damage to both the winter and spring wheat crops. Production is also lowered 0.5 million tons for adjoining Kazakhstan, which experienced the same adverse drought and heat during July and August that affected spring wheat in the central and eastern growing regions of Russia. EU-27 production is lowered 0.5 million tons mostly reflecting lower expected yields in the United Kingdom. Ukraine production is raised 0.5 million tons based on higher reported yields. Production for Afghanistan is raised 0.4 million tons mostly on higher reported area.

Global wheat consumption for 2012/13 is lowered 2.6 million tons mostly on lower wheat feed and residual use in Russia and Kazakhstan. Food use is also lowered slightly for both countries with additional reductions projected for food use in Egypt and Nigeria. Food use is raised for Afghanistan, Iran, and Libya.

Global wheat trade for 2012/13 is lowered slightly this month with imports reduced for China, Egypt, EU-27, Israel, and Nigeria. Import increases for Turkey and Iran limit the global decline in trade. Exports are reduced 2.0 million tons for Ukraine based on the recent agreement between government officials and grain traders to limit shipments because of concerns about tightening domestic supplies. Higher expected exports for Brazil, EU-27, and Turkey mostly make up for the Ukraine reduction.

World ending stocks for 2012/13 are projected 0.5 million tons lower with changes to a number of countries. The largest declines in stocks are for Russia, EU-27, China, Brazil, and Argentina. The largest increases are for Ukraine, Canada, Iran, and Turkey.

COARSE GRAINS: U.S. feed grain supplies for 2012/13 are projected higher this month with a reduction in forecast corn production more than offset by higher projected corn carryin. U.S. corn production is lowered 52 million bushels with the national average yield forecast 0.6 bushels per acre lower at 122.8 bushels. Lower yields and production in the Corn Belt and Central Plains are partly offset by increases elsewhere, particularly across the South where an early harvest is boosting available supplies.

U.S. corn supplies for 2012/13 are projected 108 million bushels higher as an increase in expected beginning stocks more than offsets lower production this month. Exports for 2011/12 are lowered 10 million bushels reflecting the slowing pace of shipments during August. Feed and residual use for 2011/12 is lowered 150 million bushels based on the record level of crop maturity and harvest progress as of September 1. State-level crop progress reports indicate that nearly 11 percent of the 2012 corn crop was harvested before the September 1 start of the 2012/13 marketing year. Based on state-by-state production forecasts from the September 12 Crop Production report, nearly 1.2 billion bushels of new-crop corn are estimated to have been available for use before the end of the old-crop 2011/12 marketing year. This is up more than 700 million bushels from a year ago. Early new-crop corn use is expected to displace use of 2011 old-crop corn and boost old-crop inventories on September 1. As a result, early new-crop usage reduces the feed and residual calculation in the balance sheet.

Total U.S. corn use for 2012/13 is raised this month with higher expected feed and residual disappearance more than offsetting lower projected exports. Feed and residual disappearance is projected 75 million bushels higher, in part reflecting higher expected September-December disappearance with the expected rise in early new-crop usage during the 2011/12 marketing year. Exports for 2012/13 are projected 50 million bushels lower with increased competition from lowerpriced South American supplies. Ending stocks for 2012/13 are projected 83 million bushels higher at 733 million. The projected range for the corn season-average farm price is lowered 30 cents on both ends of the range to $7.20 to $8.60 per bushel.

Global coarse grain supplies for 2012/13 are projected 4.0 million tons lower despite higher beginning stocks of corn in the United States and barley in Canada. Reduced corn production prospects for EU-27, Serbia, and Canada add to the decline in the United States to reduce world corn output 8.0 million tons. Higher barley production for EU-27 and Canada mostly offset reductions in oats, barley, rye, and millet production in Russia. Corn production is lowered 4.4 million tons for EU-27 with yield reductions for France, Italy, Romania, and Hungary as extended drought and heat in August further reduced production prospects across southern Europe. Serbia production is also lowered 1.2 million tons reflecting the same adverse weather conditions. Canada corn production is lowered 1.1 million tons based on the latest survey results from Statistics Canada.

Global 2012/13 corn exports are lowered 1.8 million tons this month with the largest reduction for the United States. Corn exports are also lowered for Serbia and EU-27. Partly offsetting these reductions is a 1.0-million-ton increase for Brazil exports. Lower barley exports from Russia are more than offset with increases for Canada, Ukraine, and EU-27. Foreign coarse grain consumption is lowered mostly on lower corn usage. Corn feeding is lowered 4.0 million tons for the EU-27, 1.0 million tons for Canada, and 0.4 million tons for Serbia. Corn feeding is raised 0.8 million tons for Egypt. Barley feeding is raised 1.0 million tons for EU-27, 0.9 million tons for Canada, and 0.2 million tons for Iran. Barley feeding is lowered 0.5 million tons for Ukraine, and 0.2 million tons for Russia. Global corn ending stocks are projected 0.6 million tons higher with the increase for the United States partly offset by a reduction for Brazil.

OILSEEDS: U.S. oilseed production for 2012/13 is projected at 82 million tons, down 1.4 million from last month. Lower soybean and cottonseed production is only partly offset by an increase for peanuts. Soybean supplies for 2012/13 are reduced due to lower forecast production and beginning stocks. Soybean production is projected at 2.634 billion bushels, down 58 million due to lower yields in the Midwest. Soybean exports are reduced 55 million bushels to 1.055 billion mainly due to reduced supplies. Soybean crush is reduced 15 million bushels to 1.5 billion, the lowest since 1996/97. The reduction reflects lower projected soybean meal exports and domestic soybean meal consumption. Although soybean ending stocks are projected unchanged at 115 million bushels, they would fall to a 9-year low. Other changes for 2012/13 include reduced soybean oil production and ending stocks. Soybean crush for 2011/12 is increased 15 million bushels to 1.705 billion reflecting higher-thanexpected crush reported for July. Soybean exports are increased 10 million to 1.36 billion. Residual use is lowered 10 million bushels reflecting the impact of early harvest of the 2012/13 crop in the South. Ending stocks are projected at 130 million bushels, down 15 million from last month. Other changes for 2011/12 include increased soybean oil production, exports, and ending stocks and increased domestic disappearance of soybean meal.

The U.S. season-average soybean price for 2012/13 is projected unchanged at $15.00 to $17.00 per bushel. Soybean meal prices are projected at $485 to $515 per short ton, up $25.00 on both ends of the range. Soybean oil prices are projected at 54 to 58 cents per pound, up 1 cent on both ends of the range.

Global oilseed production for 2012/13 is projected at 453.1 million tons, down 4.2 million from last month. Reductions for soybeans, sunflowerseed, and rapeseed are only partly offset by increased peanut and cottonseed production. In addition to the United States, projected soybean production is reduced for Ukraine and Canada. Early harvest results for Ukraine indicate a lower yield in part reflecting unusually hot temperatures during the growing season. Lower soybean production for Canada is based on the most recent crop survey results reported by Statistics Canada. Rapeseed production for Canada is reduced 0.9 million tons to 15.4 million based on lower yields and harvested area reported by Statistics Canada. At this level the crop is record large. Rapeseed production is also raised for the 2011 crop based on the latest Statistics Canada estimates. Other changes include higher rapeseed production for EU-27, lower sunflowerseed production for Russia, Ukraine, and EU-27, and lower cottonseed production for Brazil.

LIVESTOCK, POULTRY, AND DAIRY: The forecasts for 2012 and 2013 red meat and poultry production are reduced from last month as lower expected pork and poultry production more than offsets a higher beef production forecast. Beef production is raised in 2012 as higher fed beef and cow slaughter is forecast. The 2013 forecast is raised as higher forecast placements in second-half 2012 will result in larger fed cattle supplies in the first part of 2013. The pork production forecast for 2012 is reduced due to a slightly slower expected pace of slaughter in the third quarter and slightly lower carcass weights in the second half of the year. Pork production is reduced for 2013 as carcass weights are tempered. USDA will release the Quarterly Hogs and Pigs report on September 28, providing an indication of producer farrowing intentions into early 2013. Broiler production is reduced in both 2012 and 2013 as producer returns are expected to be pressured by higher soybean meal prices. Turkey production is raised fractionally for 2012, but the forecast for 2013 is reduced as soybean meal prices are forecast higher. Egg production is forecast lower for both 2012 and 2013 as hatching egg production is expected to reflect reduced demand from the broiler sector.

Beef imports are reduced for 2012 based on the current pace of imports, but are unchanged for 2013. Beef exports are unchanged for 2012, but the forecast for 2013 is lowered as supplies will remain relatively tight and tighter poultry supplies are expected to support domestic demand. Pork exports are reduced for both years on weaker expected demand from Asia. Poultry export forecasts are unchanged for both 2012 and 2013. Cattle prices for 2012 are raised from last month on stronger second-half demand, but the forecast for 2013 is unchanged despite higher forecast production as demand remains relatively strong. Pork prices for 2012 are forecast lower, largely reflecting current prices, but prices for 2013 are unchanged from last month. Broiler price forecasts are raised for both years as supplies are lower. Turkey and egg prices are forecast lower for 2012, reflecting current prices; forecasts for 2013 are unchanged.

The 2012 milk production forecast is reduced slightly from last month, reflecting a slower rate of growth in milk per cow in the second half of the year. The production forecast for 2013 is unchanged from last month. Skim-solids imports are raised, but the export forecast is unchanged. Product prices are forecast higher for 2012 as the milk production forecast is reduced and demand is somewhat stronger. With higher product prices, both the Class III and Class IV price forecasts are raised. For 2013, the butter price forecast is reduced slightly on weaker expected demand but forecasts for other products are unchanged. Thus, the Class II price forecast is unchanged but the Class IV price is lowered. The all milk price is forecast at $17.80 to $18.00 per cwt for 2012 and $17.85 to $18.85 per cwt for 2013.

COTTON: The 2012/13 U.S. cotton supply and demand estimates include slightly lower production and exports, resulting in lower ending stocks compared with last month. Beginning stocks are raised marginally, reflecting a revision to estimated U.S. 2011/12 ending stocks. The 2012/13 production estimate is reduced 3 percent, due mainly to lower estimated production for Texas and Mississippi, partially offset by increases for the Southeast. Domestic mill use is unchanged from last month, but exports are slightly lower due both to lower U.S. production and a reduction in total world imports. Ending stocks are now estimated at 5.3 million bales, equivalent to 35 percent of total use. The forecast range of 62 to 78 cents per pound for the marketing-year average price received by producers is narrowed 1 cent on each end.

An increase of nearly 2 million bales in world 2012/13 ending stocks is mainly attributable to sharply higher beginning stocks. Prior year adjustments for China, India, and Australia account for most of the increase in beginning stocks. For China, higher-than-expected 2011/12 imports and lower consumption are raising stocks by 1.3 million bales. For India, changes to the 2010/11 and 2011/12 balance sheets mainly reflect revisions published recently by India’s Cotton Advisory Board and raise stocks by 400,000 bales. World 2012/13 ending stocks are now projected at 76.5 million bales, including a revision to the India residual. Projected world stocks include 35.5 million bales for China.

World 2012/13 production is lowered 82,000 bales from last month, as increases for India and the African Franc Zone are more than offset by reductions for Brazil and the United States. World consumption and imports are reduced 600,000 bales, as lower demand by China is partially offset by increases for Pakistan and others; exports are reduced for Australia, India, and the United States. The decrease in China’s consumption is consistent with the 2011/12 reduction. China’s consumption is expected to fall 2.5 percent from last season due to the government’s price support, reserve, and stock policies.


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