ARLINGTON, Va. (DTN) — USDA projected a 14.27 billion bushel corn crop, a record that’s enough to replenish stocks. That will put downward pressure on prices, with USDA predicting farmers will receive an average price of $5 per bushel in the 2012/13 crop year.
“Remember, this is the price received by farmers, which includes forward contracting. So that implies cash market prices even lower,” said Economic Research Service economist Edward Allen.
USDA projected a 6{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} increase in soybean production and an 8{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} increase in wheat. The USDA estimates assume average weather and that most of the acreage idled by prevented-planting claims last spring will return to production.
“As a result of these very high general level of prices, with corn in 2011/12 having an especially important role supporting the prices of the other commodities like wheat and even soybeans, we’ve had a reaction in area that we’re expecting for 2012/13,” Allen said.
Combined acres for wheat, corn and soybeans are projected to be a record high and up 3{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} from 2011. The numbers presented on Friday held corn and wheat acres steady with baseline projections released last week, but increased soybeans by 1 million acres.
“The big picture is that many possible changes could occur in supply and demand categories for both corn and soybeans and USDA’s outlook numbers have likely already been priced into the market,” said DTN Senior Analyst Darin Newsom.
CORN OUTLOOK
With corn planting acreage at 94 million, farmers are projected to produce a record 14.27 billion bushels of corn, up 15{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} from 2011 and well above the previous high of 13.09 billion bushels in 2009. Corn supply is projected to rise 12{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} to a record 15.08 billion bushels.
“There has been very little, actually no rebound in corn stocks this year. This has maintained very tight markets for corn, and we’ll be looking at fairly minimal pipeline stocks for U.S. corn at the end of the marketing year,” Allen said. “However, we’re saying that things are likely to be dramatically different in 2012/13 because with normal weather we expect a yield rebound. Since we have even higher area, the production response that we expect in the United States is fairly dramatic.”
Corn yields are projected at 164 bushels an acre “reflecting the 1990-2010 trend.” The yields assume average, not favorable, weather with some areas having more adverse weather offset by areas with fantastic weather. Allen said USDA recognizes both sides of the trendline argument: advocates on one side saying seeds keep getting better and others pointing to increased pressure from disease and climate change.
“These corn numbers are the same as what we saw in USDA’s baseline projections released earlier this month,” Newsom said. “The ending stocks and stocks-to-use figures are bearish.”
Total corn use is projected at 13.47 billion bushels, an increase of 765 million bushels above the current marketing year “with a sharp rebound in feed and residual use and higher corn exports offsetting a small decline in projected use in the production of ethanol.”
Corn use for ethanol production is expected to be 4.95 billion bushels, a 50-million-bushel decrease from 2011/12. That’s expected to help buoy stocks.
Corn exports are projected to rise 200 million bushels to 1.9 billion bushels. USDA stated Argentina’s ability to compete with the U.S. is expected to diminish while Brazil is expected to provide competition for U.S. exports. Brazil’s competitiveness will continue to depend heavily on government support programs, relative currency values and domestic livestock and poultry demand.
Ukraine, which nearly doubled its corn acreage and has become a large exporter this year, is expected to continue exporting large volumes of corn in 2012-13, “partly because corn will be planted on significant areas of winter-killed wheat acreage in 2012.”
Further, China’s import demand remains uncertain even as consumption is expected to continue to grow.
“The role of the corn market in supporting the prices of the other commodities, has been crucial,” Allen said. “So when we say things are going to turn around and we’re going to have large corn supplies, that’s a very fundament effect across a lot of the commodities.”
SOYBEAN OUTLOOK
Soybean supplies for the 2012-13 marketing year are projected at 3.54 billion bushels, up 8{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} from 2011-12, as both beginning stocks and production are expected to be larger. Soybean production is projected 6{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} higher at 3.25 billion bushels due to increased harvested acreage and yield. Planting will be 75 million acres, but the average yield is projected at 43.9 bushels an acre, up 2.4{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} from 2011. “If realized, this year’s projected yield would be the second highest after the record 44 bushels per acre in 2009,” USDA stated.
“Soybean acreage increased by 1 million from baseline projections,” Newsom said. “In the long run it is going to come down to what the weather is across the U.S. this spring and summer and possible changes that could occur in South American production estimates.”
Argentina and Brazil have been ramping up soybean acreage, but a drought will trim their production this year, Allen said. “The size of that crop will be an important factor in future determinations of price, both in the short and longer term,” Allen said.
Soybean domestic use is projected at 1.785 billion bushels, up 3{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} from 2011-12. Crush is projected to increase 45 million bushels to 1.66 billion, supported by improved soybean meal exports and a slight increase in domestic demand.
Soybean ending stocks are projected to be 205 million bushels, down 70 million from the level projected for 2011-12. The ending stocks-to-use ratio will be 6.1{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f}, below the two previous years but near the five-year average of 6.3{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f}.
Soybean farm prices are expected to drop slightly to an average of $11.50 per bushel.
Soybean exports are projected to be a record 1.55 billion bushels in 2012-13 as well. “The U.S. share of global trade is likely to rise partly supported by reduced competition from South American countries where exportable supplies are impacted by drought-reduced crops expected to be harvested in 2012,” USDA reported. Further, “Foreign demand growth will be driven by China, which accounts for more than half of the world’s imports.”
WHEAT OUTLOOK
Wheat production in 2012 is expected to increase more than 8{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} to 2.165 billion bushels due to a hike in acreage and yield. The national average wheat yield is projected at 44.5 bushels per acre, up .8 bushels from 2011, “reflecting a return to trend yields.”
Although drought conditions persist in the central Great Plains, USDA cites timely winter precipitation as a boost in crop conditions. Hard red winter wheat states have 46{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} of their crop in good or excellent conditions, USDA stated, compared with only 24{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} last year.
Production for hard red winter wheat, durum and other spring wheat is expected to rise, but there will be declines in soft red winter wheat and white winter wheat.
Domestic use of wheat is expected to increase 36 million bushels. Wheat exports are expected to remain even at 975 million bushels “because of strong competition from other major wheat exporters.” World wheat production is expected to be just below 2011-12 levels with increases in Canada, Europe and Russia offset by the winterkill in Ukraine.
Wheat ending stocks are projected 13{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} higher at 957 million bushels, the highest since 2009-10. The stocks-to-use ratio for 2012-13 is projected at 44{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f}.
The 2012-13 farm price for all wheat is projected at $6.30 a bushel, down about $1 from the midpoint of the 2011-12 prices.
OTHER CROPS
Cotton: Cotton acreage is expected to decline about 10{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} in 2012 due to lower cotton prices relative to other crops. Acreage for 2012 is projected at 13 million acres. Production however is projected to rise to 17 million bales. Prices are expected to drop from an average of 90 cents a pound to 80 cents a pound for 2012-13.
Rice: Projected at 2.75 million acres, up 2{962fe9be9a8a5c386944bfa41f48d98b010325707b70b1fa6182bcabd27c5d7f} from 2011. All of the gains will be in the long-grain rice Delta states. Rice is expected to have an average price of $14.70 cwt, up 50 cents from 2011-12 midpoint.
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