subject: Usde Forecast Lower Corn And Soybean Production [print this page] The U.S. Department of Agriculture lowered 2012 production forecasts for corn and soybeans.
Economists with the American Farm Bureau Federation said the report was "bearish" for corn prices in one respect, because the estimate for ending stocks was not reduced as much as expected by some market analysts.
"As anticipated, lower projected production for both corn and soybeans was reported this month," said AFBF economist Todd Davis. "It will be some time before the long-term effects of the 2012 drought are fully played out. But it appears likely that continued strong worldwide demand for corn and soybeans will lead to higher projected prices."
USDA forecast corn production at 10.7 billion bushels. The average yield for corn was forecast at 122.8 bushels per acre this year, down slightly from the August prediction. Once harvest is complete, if the average corn yield comes in at 122.8 bushels per acre, it would be the smallest average yield since 2003.
Soybean production is forecast at 2.63 billion bushels. The average yield for soybeans is forecast at 35.3 bushels per acre. Once harvest is complete, if the average soybean yield comes in at 35.3 bushels per acre, it would be the smallest average yield since 1996.
Corn ending stocks for the marketing year were pegged slightly higher compared to USDA's August estimate, at 733 million bushels, which represents 24 days of supply.
Ending stocks for soybeans were projected to be 115 million bushels (about a 15-day supply), unchanged compared to USDA's August projection.
Davis said the corn and soybean planting season in South America, which begins soon, continues to be the subject of much attention and speculation.
"All eyes are on South America as spring begins," said Davis. "Weather remains a major factor for crops in both North and South America. A bountiful harvest of both corn and soybeans is needed to rebuild stocks of these important crops."
Globally, USDA is still projecting the second-largest corn crop in history. Production in Argentina is up more than 30 percent over last year, while Mexico increased output 19 percent, South Africa 17 percent, Canada 9 percent, and China 4 percent.
At 2.71 billion metric tons, USDA is also expecting the total 2012-13 grain supply (coarse grains, wheat and rice) to be the second-largest ever. The U.S. ethanol industry is expected to use just 2.9 percent of the global grain supply in 2012-13, according to the Renewable Fuels Association (RFA).
RFA President Bob Dinneen said the USDA crop production report confirmed that farmers are likely to harvest the eighth-largest corn crop on record this fall, despite enduring the worst drought conditions in more than 50 years.
On the demand side, Dinneen said USDA increased 2012-13 livestock feed demand to 4.15 billion bushels, up 75 million bushels from last month's report. Corn use for ethanol and co-products was unchanged at 4.5 billion bushels. He said because approximately one-third of every bushel of corn used for ethanol returns to the feed market as distillers grains, feed use will account for approximately 5.5 billion bushels in 2012-13 on a net basis, compared to net corn use for ethanol of 3.15 billion bushels.
Thus, on a net basis, Dinneen said ethanol use will account for 26 percent of the total supply, while feed use accounts for 46 percent.
"This report should bring some calm and increased certainty to the markets," said Dinneen. "With each passing day, we have a better sense of the size of this year's crop. We are thankful that it appears very little additional damage was done to the corn crop in late August and early September."
He said that it's "truly remarkable" that even in the face of the worst drought in 50 years and the hottest July in recorded history, U.S. farmers were able to produce a corn crop of this size. Dinneen also said the report "clearly shows that all end users are sharing in the pain and participating in demand rationing."
"The notion that the ethanol industry is somehow insulated from demand rationing because of the RFS is shown to be patently false, with ethanol use projected down 10 percent from last year and feed use reduced by less than 6 percent," Dinneen said.
USDA will be conducting producer surveys and field analysis throughout the fall to provide information about the drought damage done to the 2012 corn and soybean crop, according to Davis.
