Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
It All Hinges on Weather
Results are now in for the long awaited August 12 USDA Supply and Demand estimates. On first glance one would have to think no harm done. If USDA had not increased total use for U.S. corn by 350 million bushels to offset the impact of the projected production increase then this report would have been viewed as more negative for corn prices. If USDA had not decreased the yield estimate for soybean production then that would have cast a negative tone to new crop soybean prices. Considering the fact that those two things did not happen, one could go so far as to believe that this report was somewhat bullish and not just for soybeans. My reasoning is simply that ending stocks for corn could have been closer to 2 billion bushels than this report suggests. It is important to bear in mind that the numbers in this report are estimates. The accuracy of these estimates will not be known until harvest.
Corn Analysis
U.S. corn production is now forecast at 12.761 billion bushels, 471 million bushels larger than the July estimate. USDA re-surveyed planted acres in seven states, leaving ‘09 U.S. corn planted acres at 87 million. The estimate for harvested acres was reduced by 100,000 acres to 80 million. The estimated yield was increased 6.1 bushels per acre from last month, now placed at 159.5 bushels per acre. Total supply for the ‘09/‘10 marketing year was only increased 421 million bushels due to a 50 million bushel decrease in the estimate for beginning stocks from one month ago.
On the demand side, the estimate for feed and residual use was increased 100 million bushels; food, seed and industrial use was increased 100 million bushels; and the estimate for ethanol for fuel use was increased 100 million bushels placing total domestic use at 10.775 billion bushels, a 200 million bushel increase from last month. The estimate for U.S. corn exports was increased 150 million bushels bringing total use to a projected 12.875 billion bushels, a 350 million bushel increase in projected corn use from last month. Ending stocks for U.S. corn, now projected at 1.621 billion bushels, are 71 million bushels larger than a month ago. The season average farm price was reduced by 25 cents per bushel on both ends of the price range, now estimated at $3.10 to $3.90 per bushel.
World ending corn stocks are now projected at 141.49 million metric tons for the ‘09/‘10 marketing year and 144.08 MMT for the ‘08/‘09 marketing year. Both estimates were increased from last month.
Soybean Analysis
U.S. soybean production is now projected at 3.199 billion bushels, 60 million bushels less than a month ago. Planted acres were increased by 200,000 acres from last month, now placed at 77.7 million acres. Harvested acres were increased by 300,000 acres from last month. The yield per acre was decreased 9/10th of a bushel and is now estimated at 41.7 bushels per acre. The reduction in projected U.S. soybean production resulted in total soybean supply being decreased by 60 million bushels, now placed at 3.320 billion bushels.
Soybean demand was reduced 10 million bushels for crushings; 10 million bushels for exports; and 1 million bushels for residual placing the August projection for total use at 3.109 billion bushels, 31 million bushels less than a month ago. Ending stocks for U.S. soybeans were reduced 40 million bushels from last month, now projected at 210 million bushels. Ending stocks for the old crop were left unchanged at 110 million bushels. The season average farm price was increased by 10 cents per bushel on both ends of the price range, now placed at $8.40 to $10.40 per bushel.
World ending stocks for soybeans are projected at 50.32 million metric tons for the ‘09/‘10 marketing year and 41 MMT for ‘08/‘09. Both estimates were lowered from last month.
Wheat Analysis
The estimate for U.S. wheat production was increased by 72 million bushels from last month due to a 1.4 bushel increase in the yield projection, from 41.9 to 43.3 bushels per acre. Imports were lowered 5 million bushels. Total U.S. wheat supply is now projected at 2.961 billion bushels, 67 million bushels larger than last month.
Domestic use for wheat projections increased by 5 million bushels. The export projection increased by 25 million bushels, now projected at 950 million bushels. Total use is now projected at 2.218 billion bushels for all U.S. wheat, 70 million bushels less than last month. Ending stocks for U.S. wheat are now placed at 743 million bushels, 37 million bushels larger than last month’s estimate. The estimate for the season average farm price was reduced 10 cents per bushel on both ends of the price range, now placed at $4.70 to $5.70 per bushel.
World ending stocks for wheat are projected at 183.56 million metric tons for the ‘09/‘10 marketing year and 169.5 MMT for ‘08/‘09. Both estimates were increased from last month.
Market Strategy
From this point forward, weather developments will be the determining factor in whether we meet these production estimates, exceed them, or fall short of the projections. Since growing conditions are nearly ideal in the Corn Belt, ‘09 U.S. corn and soybean production are most likely to be impacted by the length of the growing season. A long growing season would mean that these forecasts are likely to be met. A shortened season stemming from an early frost would greatly reduce crop yields. In the meantime it may become possible to advance some pre-harvest sales for corn and soybeans as commodity traders jockey their positions to be in line with the, eventual-actual crop size. Currently, Dec ‘09 corn futures are trading at $3.30; Nov ‘09 soybeans at $10.34; and Dec ‘09 SRW wheat at $5.07 per bushel. For technical assistance on making grain marketing decisions contact: Carl L. German, Extension Crops Marketing Specialist.