USDA’s long-awaited September World Agricultural Supply and Demand Estimates (WASDE) held few surprises. "The report is modestly bearish across the board," says Jonah Ford, senior analyst with Ceres Hedge, Chicago. Ford was the commentator on a post-report MGEX conference call. Corn and wheat futures sank following the report, but soybean futures climbed.
USDA’s September estimate for corn production came in at 10.727 billion bushels, slightly lower than the average estimate of 10.779 billion. The department forecast for the U.S. average yield is 122.8 bushels per acre, below the average trade estimate of 123.4 bushels per acre. USDA also estimates 2012-13 corn-ending stocks at 733 million bushels, well above the average estimate of 618 million bushels.
Perhaps the biggest surprise in corn numbers was USDA’s estimate of old-crop carryout, which the department raised to 1.181 billion bushels, substantially higher than the trade estimate of 1.014 billion bushels and 160 million bushels higher than last month’s estimate.
The drop in old-crop corn demand came primarily from the livestock sector. "As the lower-quality, new-crop corn is harvested, it is probably going to be fed right away, and the higher-quality old-crop corn will be stored," says Chad Hart, agricultural economist with Iowa State University. The higher old-crop carryout also helped boost new-crop carryout in USDA’s September estimates.
USDA lowered its average estimate for new-crop corn prices from last month’s $7.50 to $8.90 to $7.20 to $8.60 this month.
USDA puts soybean production at 2.634 billion bushels, below the average trade estimate of 2.692 billion bushels. The department expects average soybean yield to be 35.3 bushels per acre, below the average trade guess of 36.1 bushels per acre. USDA’s estimated 2012-13 carryout is now 115 million bushels, which is higher than the average trade estimate of 106 million bushels.
"A 115-million-bushel carryout would be a nine-year low," says Ford. The last time the soybean carryout was that low was in 2003-04, when soybean prices soared due to drought in Indiana and Illinois and heavy export demand. Even so, USDA left its estimates for new-crop soybean prices unchanged from last forecast of $15 to $17/bu.
"The changes in the U.S. wheat numbers were pretty much irrelevant to the big picture," says Ford. USDA estimates total production of 2.268 billion bushels, which in line with the average estimate. USDA’s yield estimate for wheat of 46.5 bushels per acre is also in line with the average trade estimate. The new-crop carryout estimate of 698 million bushels, however, is lower than the average trade estimate of 709 million bushels. USDA also lowered the average new-crop price for wheat from last month’s $7.60 to $9/bu. to $7.50 to $8.70 in the September report. "A lot of sales are already done," says Ford. "I expect price weakness from here."
Globally, the wheat supply is dropping. "There’s not much concern about a ban on Russian exports at this point because Russia does not have wheat to export," says Ford.
Problems are also developing in Australia. "There (eventually) could be as much as 5 million tons taken off production," says Ford. "Australia could have a pretty weak crop this year."