Record 2013 crops projected

Record 2013 crops projected

- Corn production expected to rise 35%. - Soybean production expected to hit 3.4b bu. - Soybean meal prices slated to fall $150 per to

THIS is going to "sound a little bit like déjà vu" was the disclaimer U.S. Department of Agriculture chief economist Joe Glauber gave in delivering the department's annual grain and oilseed outlook last week.

Hosting USDA's annual Agricultural Outlook Forum, Glauber said the 2013 forecast is very similar to the forecast presented a year ago -- one that calls for record corn and soybean crops.

Last year's record forecast did not come to pass, as one of the worst droughts in a half-century withered production across near-record planted acreage.

With a return to trend-line yields and only a slightly smaller planted area this year, USDA forecasted corn and soybean production to set records, at 14.530 billion and 3.405 billion bu., respectively.

Corn production, if realized, would be a 35% jump from last year's parched production. With a return to normal weather and productivity at 163.6 bu. per acre, 96.5 million acres planted would yield the largest corn crop in history and would result in a sharply lower price than farmers reaped in 2012 (Table 1).

USDA projected a season-average corn price of $4.80/bu. due to the 28% jump in the supplies. The increased production will far offset the smallest carry-in projected in 17 years.

Looking at the demand side of the ledger, USDA forecasted total corn usage at 13.0 billion bu., up 1.7 billion from the 2012-13 marketing year. A sharp rebound in feed usage -- 950 million bu. -- accounts for most of the increase, and although exports will also bounce back from this year's 41-year low, corn sales abroad will still achieve their second-smallest total since 1993-94.

Compared to the sharp uptick in feed and export demand, ethanol demand for corn is projected to show a much more muted recovery, rising 175 million bu. The total projected ethanol use of 4.675 billion bu. is still 344 million bu. smaller than the record set in 2010-11. Those projections suggest that 36% of the U.S. corn crop will be utilized in the production of ethanol, off from USDA's estimate of 40% for both 2011-12 and 2012-13.

Ending corn stocks are pegged to more than triple the 2012-13 forecast, reaching 2.177 billion bu. The forecast notes that, while use will approach the record demand levels of 2009-10 and 2010-11, strong global competition will limit the expansion of exports, allowing stocks a chance to rebound significantly. That relative abundance will put a great deal of pressure on prices by harvest.

Soybean production is projected to increase 13% to 3.405 billion bu. (Table 2). With a national average yield of 44.5 bu. per acre and planted acreage of 77.5 million, USDA projected slightly more acres shifting from cotton production to soybeans and slightly more double-crop seedings in soft red winter wheat regions.

Domestic soybean use is projected to be 1.795 billion bu., up 3% from 2012-13, with the domestic crush up 45 million bu. and domestic soybean meal feeding up 1.7%. Soybean prices, like for corn, are expected to moderate with a return to trend-line yields, with USDA forecasting an average price of $10.50/bu.; soybean meal prices are expected to fall to $300 per ton (Table 3).

While soybean meal supplies are expected to recover somewhat, supplies of soybean oil are expected to tighten even further, supported by an increase in the renewable fuel standard's biodiesel use mandate to 1.28 billion gal. for 2013. Accordingly, soybean oil used in biodiesel is expected to grow by 300 million lb. from 2012-13 levels, and soybean oil will account for just more than half of expected biodiesel production in the U.S.

Soybean exports are projected to maintain their blistering pace, growing to 1.5 billion bu. and boosting the U.S. share of global trade. Demand from China will be key as the country typically accounts for more than half of world imports of soybeans.

 

Market recap

Given that traders have largely assumed that crops will return to trend-line yields in 2013, the markets reacted relatively favorably to the USDA outlook. While corn and wheat prices settled in a range of 5-20 cents lower last Thursday, prices inched higher by midday Friday as traders sifted through USDA's balance sheets.

Soybeans were the big winner last week, breaking the $15/bu. mark on the nearby contract early in the final trading session of the week and hitting 16-week highs for the front month in the process.

Export demand last week was good for soybeans, with China back in the market. Through its daily reporting system, USDA announced major sales of both old-crop and new-crop soybeans three out of five days last week, with 410,000 metric tons of beans sold to China last Friday, 350,000 mt of which were for new-crop delivery.

Last Tuesday, Germany-based analyst Oil World cut its forecast of Argentina's soybean crop by 2 million mt, though it boosted its forecast of Brazil's harvest by 500,000 mt. Logistical problems with getting Brazil's soybeans to market were touted frequently last week as the reason luring Chinese buyers back to the U.S. to make their soybean purchases.

In its weekly report, the Energy Information Administration noted that ethanol production rebounded for a third week, hitting an average production of 797,000 barrels per day, the largest output in six weeks. Daily corn usage climbed back above 12 million bu., although distillers grain production fell to just shy of 80,000 mt per day.

 

Ingredient watch

USDA's outlook suggested that feed prices should moderate throughout 2013 -- pending a return to normal weather and production in the U.S. and elsewhere. Multiyear droughts are still very much a possibility and a concern for end users, and recent market lulls mark potential pricing opportunities.

Notably, USDA projected a roughly $150-per-ton drop in soybean meal prices. Currently, soybean meal is the major competitor to most other protein meals, with marketers and merchandisers of substitute ingredients being more in tune to soybean prices than they are worried about direct competitors' pricing within a given ingredient market.

Prices for rendered animal proteins firmed again last week as production continued to tighten. While slaughter weights are increasing and packers are slowing chain speeds or running fewer shifts per week, the overall supply of rendered product is shrinking.

While last week's announcement of a proposed change in the U.S. risk status for bovine spongiform encephalopathy would be positive to global trade in ruminant proteins, marketers are concerned about the recently announced case of avian influenza in Mexico because many containers of grease and poultry meals head south of the border to feed Mexican broilers.

 

1. Corn supply, demand and price by marketing year

 

2010-11

2011-12

2012-13

2013-14

Planted acres (million)

88.2

91.9

97.2

96.5

Harvested acres (million)

81.4

84.0

87.4

88.8

Yield (bu./acre)

152.8

147.2

123.4

163.6

 

-Million bu.-

Production

12,447

12,360

10,780

14,530

Beginning stocks

1,708

1,128

989

632

Imports

28

29

100

25

Supply

14,182

13,516

11,869

15,187

Feed, residual

4,795

4,548

4,450

5,400

Ethanol

5,019

5,011

4,500

4,675

Food, seed, other industrial

1,407

1,426

1,387

1,435

Total food, seed, industrial

6,426

6,437

5,887

6,110

Total domestic use

11,221

10,985

10,337

11,510

Exports

1,834

1,543

900

1,500

Total use

13,055

12,527

11,237

13,010

Ending stocks

1,128

989

632

2,177

Stocks:use

8.6

7.9

5.6

16.7

Season avg. farm price ($/bu.)

5.18

6.22

7.20

4.80

 

2. Soybean supply, demand and price by marketing year

 

2010-11

2011-12

2012-13

2013-14

Planted acres (million)

77.4

75.0

77.2

77.5

Harvested acres (million)

76.6

73.8

76.1

76.6

Yield (bu./acre)

43.5

41.9

39.6

44.5

 

-Million bu.-

Production

3,329

3,094

3,015

3,405

Beginning stocks

151

215

169

125

Imports

14

16

20

15

Supply

3,495

3,325

3,204

3,545

Crush

1,648

1,703

1,615

1,660

Seed

87

90

89

87

Residual

43

1

30

48

Total domestic use

1,779

1,793

1,735

1,795

Exports

1,501

1,362

1,345

1,500

Total use

3,280

3,155

3,080

3,295

Ending stocks

215

169

125

250

Stocks:use

6.6

5.4

4.1

7.6

Season avg. farm price ($/bu.)

11.30

12.50

14.30

10.50

 

3. Soybean meal supply, demand and price by marketing year

 

2010-11

2011-12

2012-13

2013-14

 

-1,000 tons-

Production

39,251

41,025

38,450

39,385

Beginning stocks

302

350

300

300

Imports

180

216

250

165

Supply

39,732

41,591

39,000

39,850

Domestic use

30,301

31,550

29,900

30,400

Exports

9,081

9,741

8,800

9,150

Total use

39,382

41,291

38,700

39,550

Ending stocks

350

300

300

300

Avg. price ($/ton)

345.52

393.53

445.00

300.00

 

Volume:85 Issue:08

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