USDA trims estimates for crop production

USDA trims estimates for crop production

- Corn, soybean crops smaller than July projection. - Corn estimate still points to record-large crop. - Soybean crop could be third l

WHEN it rains, it pours, and the grain markets received a raft of bullish news last week as the U.S. Department of Agriculture trimmed its forecast for U.S. corn production and the Farm Service Agency (FSA) reported that 3.41 million acres were never planted.

In the Aug. 12 "Crop Production" and "World Agricultural Supply & Demand Estimates" (WASDE) reports, USDA reined in its previous forecast for 2013 corn production, projecting a crop of only 13.763 billion bu., down from a record 13.95 billion last month (Table 1). While the crop is still being discussed as a "bin buster," the market saw the reduction as both bullish and prudent.

USDA's first survey-based corn yield forecast, at 154.4 bu. per acre, was down 2.1 bu. from last month's projection. Even though it's a significant improvement from last year's drought-hammered figure, the yield estimate is still nearly 6 bu. smaller than pre-planting predictions.

Digging into the new-crop corn balance sheet, USDA reduced beginning stocks by 10 million bu. on increased old-crop exports (although exports were offset somewhat by slightly higher imports, as well). Moderate prices in recent weeks have allowed more bushels of corn to move overseas.

A smaller crop, however, means fewer bushels going to livestock feeders: USDA trimmed its feed and residual use projection by 50 million bu.

Exports, meanwhile, were lowered another 25 million bu. on strong overseas competition and fewer available U.S. bushels than previously anticipated.

Overall, USDA reduced its corn ending stocks forecast by 122 million bu. (Table 2), and boosted its pricing projections by a dime, now sitting at $4.50-5.30/bu. USDA noted, however, that its price projection reflects forward pricing from early in the year and that cash prices will likely fall below the official estimate.

Rice Dairy feed grains analyst Jerry Gidel said the August report usually provides the trade with a solid idea of the upcoming crop prospects during a normal growing season; however, "the 2013 crop year hasn't been anything close to a typical growing season," he noted.

"This year's wet/cool spring delayed plantings by three to four weeks, while this summer's temperatures have been below normal in the northern areas and rainfall has dropped off sharply in an important area of the western Corn Belt over the past six weeks," Gidel said.

Because of that, USDA's survey may not have provided quite as much clarity as it would in a normal year. Ear and pod counts, grain weights and other relevant data about the developing crop may have been based on average relationships rather than actual observed data, leaving the door open for further adjustments in the months ahead.

While USDA did project a smaller crop than traders had anticipated, it is worth noting that 13.8 billion bu. will still be a new corn production record, and a 154.4 bu. average yield will be the largest average since 2009. USDA did not adjust its harvested acres estimate, leaving it at 89.1 million.

That figure may necessarily change, however, as FSA released data on prevented plantings Aug. 15. Based on crop insurance claims, farmers were unable to plant 3.41 million acres of corn due to planting delays this spring.

While USDA will update its planting figures again in September, FSA's preliminary report suggests that farmers planted only 88.8 million acres of corn.

With the production estimates and ending stocks projections both trimmed, along with FSA's planting data, traders were bullish on corn last week, taking futures higher in three of four sessions from Monday through Thursday. December corn had gained 19 cents by last Thursday's settlement.

USDA trimmed its global ending stocks estimates slightly for both old-crop and new-crop corn, reflecting a tighter U.S. supply. The agency actually increased its old-crop soybean stocks figure by 700,000 metric tons but dropped its new-crop estimate by 1.85 million (Table 3).

Smaller U.S. soybean production was partially offset by increases in other parts of the world but was enough to lead to the reduction. Even so, USDA pointed out that global soybean stocks remain record large despite the August reduction.

 

Soybeans

In its monthly updates, USDA trimmed both yield and acreage prospects for soybeans, pegging production at 3.25 billion bu., down from 3.42 billion a month ago. The average yield estimate is now 42.6 bu. per acre, compared with a July projection of 44.5 bu.

Based on data gathered from resurveying farmers in 14 states about planting delays, USDA shaved 500,000 acres off both the planted and harvest area estimates. Reductions were made in Kansas, South Dakota, North Carolina, Minnesota and Arkansas.

Current estimates call for record yields in Michigan, Ohio, Pennsylvania and New York.

University of Illinois economist Darrel Good noted last week that USDA's projections for Illinois seem a little low, at 47 bu. per acre, and a little high for Iowa at 46 bu. per acre, based on actual conditions in both states.

Needless to say, a miss in either state could significantly alter that final production figure for the U.S. crop. Currently, the estimate calls for the third-largest U.S. soybean crop in history.

"The forecast of the inventory of old-crop soybeans at the beginning of the 2013-14 marketing year on Sept. 1 was unchanged from last month's projection of 125 million bu.," Good said. "However, the forecast of the domestic crush during the year ending this month was increased by 25 million bu., the forecast of imports was increased by 10 million bu. and the forecast of exports was reduced by 15 million bu. With just over three weeks left in the 2012-13 marketing year, it appears that exports will be slightly larger than the revised forecast."

For the upcoming marketing year, Good said the domestic soybean crush forecast was reduced by 20 million bu., and the exports forecast was reduced by 65 million bu.

"The lower export forecast reflects anticipation of loss of market share to Argentina," Good said. "Year-ending stocks of U.S. soybeans are projected at 220 million bu., 75 million less than forecasted last month. The marketing-year average farm price is projected in a range of $10.35-12.35/bu., 60 cents above last month's projection."

In last week's FSA report, the agency said farmers were prevented from planting 1.62 million acres of soybeans.

USDA's corn and soybean production forecasts will be updated on Sept. 12 and again in October and November.

"There seems to be room for the average corn yield forecast to increase if the growing season is not cut short with an early freeze," Good said. "In addition, the current forecasts of marketing-year corn exports and feed and residual use appear generous. Corn prices increased in response to today's reports, but supplies may turn out to be more abundant than currently forecast.

"While the soybean production forecast may also increase with a full growing season, the current forecasts of consumption may actually understate the domestic demand for soybean oil and, perhaps, the export demand for soybeans. An era of higher soybean prices in relation to corn prices is still expected," Good concluded.

 

1. U.S. crop production forecasts, million bu.

 

USDA

Avg.

Trade

USDA

Final

Aug. est.

est.

range

July est.

2012 est.

Corn

13,763

13,980

13,485-14,269

13,950

10,780

Soybeans

3,255

3,338

3,220-3,400

3,420

3,015

Wheat

2,114

2,112

2,025-2,148

2,114

2,269

All winter

1,543

1,548

1,510-1,588

1,543

1,645

Other spring

511

503

435-538

513

542

 

2. U.S. ending stocks, million bu.

 

USDA

Avg.

Trade

USDA

2012-13

Aug. est.

est.

range

July est.

Corn

719

735

704-819

729

Soybeans

125

122

109-135

125

2013-14

Corn

1,837

1,996

1,520-2,431

1,959

Soybeans

220

270

231-306

295

Wheat

551

573

489-653

576

 

3. Global ending stocks, mmt

 

USDA

Avg.

Trade

USDA

2012-13

Aug. est.

est.

range

July est.

Corn

123.11

124.042

122.82-126.00

123.570

Soybeans

62.22

61.417

60.25-62.50

61.520

2013-14

Corn

150.17

151.090

148.00-155.00

150.970

Soybeans

72.27

73.591

68.48-75.10

74.120

Wheat

172.99

171.838

168.00-181.11

172.380

Sources: Reuters, USDA.

 

Volume:85 Issue:33

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