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May 10 WASDE Could Cause Grain Market Concerns

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The USDA Crop Production and World Agricultural Supply and Demand Estimates (WADSE) Reports released on May 10 were regarded as bearishfor the corn market and neutral to bearish for the soybean market in the coming months. Corn stocks are expected to more than double by the end of the next crop marketing year, while the ending stocks for soybeans are expected show more moderate increases for the 2013-2014 marketing year, which runs from Sept. 1, 2013 to Aug. 31, 2014. Following are some highlights of the latest USDA WADSE report:

 

Corn

According to the May 10 USDA WADSE report, the projected corn ending stocks for 2012-2013 are now estimated at 759 million bushels, which was increased by 2 million bushels compared to the April WADSE Report. This was based on a reduction in the expected total amount of corn exports for the year. The 2012-2013 ending stocks level is still below the 2011-2012 ending stocks of 989 million bushels, and about half of the corn carryover level of over 1.7 billion bushels for 2009-2010. USDA is projecting that total U.S. corn use for 2012-2013 will be approximately 11.14 billion bushels for livestock feed, ethanol, food products, seed, exports, etc., which is down from approximately 12.65 billion bushels in 2011-2012, and slightly over 13 billion bushels in 2010-2011.

Based on the most recent report, USDA is projecting the corn ending stocks to increase by more than 25% by the end of the 2013-2014 marketing year, compared to 2012-2013 levels, increasing to just over 2.00 billion bushels. This would be the highest level of ending stocks since the 2005-2006 carryover level of 1.97 billion bushels. The important ending stocks-to-use ratio for corn is projected to increase from the current level of 6.8% to a level to about 15.5% for 2013-2014. USDA is projecting total corn usage to increase to 12.92 billion bushels for 2013-2014; however, they are also estimating total U.S. corn production for 2013 to increase by 3.03 billion bushels compared to the 2012 drought reduced production levels.

According to the May 10 report, the total U.S. corn production for 2013 is estimated at 14.1 billion bushels, which far surpasses the 2012 total corn production of 11.1 billion bushels, or the record U.S. corn production of 13.1 billion bushels in 2009. The report indicated an estimated 97.3 million acres planted to corn in 2013, up slightly from the 97.2 million planted acres in 2012, and up 6% from 91.9 million acres in 2011. If achieved, the 2013 planted corn acres would be the highest since 1936, when 102 million acres were planted.

USDA has lowered the projected national average corn yield for 2013 to 158 bu., a reduction of 5.6 bu./acre from the 2013 trend-line national corn yield of 163.6 bu. USDA made the reduction in the expected average corn yield due to the lateness of corn planting in the major growing areas of the U.S. The projected 2013 average corn yield compares to national average corn yields of 123.4 in the drought year of 2012, 147.2 bu. in 2011, 152.8 bu. in 2010 and the record national average corn yield of 164.7 bu. in 2009.

USDA is now estimating the average U.S on-farm corn price for the 2013-2014 marketing year in a range of $4.30-5.10/bu., or an average price of $4.70, which is a significant decrease from the 2012-2013 estimated average on-farm price of $6.90/bu. This compares to an estimated average farm prices of $6.10 for 2011-2012 and $5.18 for 2010-11.

 

Soybeans

According to the May 10 USDA WADSE Report, the projected soybean ending stocks for 2011-2012 are estimated at 210 million bushels, which was the same as the April soybean carryover estimate. The projected 2012-2013 soybean ending stock level compares to carryover levels of 169 million bushels in 2011-2012, and 215 million bushels in 2010-2011.

Based on the recent report, soybean ending stocks for 2013-2014 are expected to increase to 265 million bushels, and would increase the stocks-to-use ratio to approximately 8%, which would be the highest in recent years. This estimate is based on increased soybean production in 2013, as well as increased levels of usage for the soybean crush and for soybean exports in 2013-2014, compared to a year earlier. Total U.S. soybean production in 2013 is expected to be approximately 3.39 billion bushels, which compares to 3.01 billion bushels in 2012 and 3.09 billion bushels in 2011. Planted soybean acres for 2012 are estimated at 77.1 million acres, compared to 77.2 million acres in 2012, and 75.0 million acres in 2011. USDA is estimating a national average soybean yield of 44.5 bu./acre in 2013, which compares to 39.6 bu. in 2012, 41.5 bu. in 2011, and the U.S. record soybean yield of 44.0 bu. in 2009.

USDA is now estimating the U.S on-farm soybean price for the 2013-2014 marketing year in a range from $9.50 to $11.50/bu., or an average price of $10.50, which compares to a current estimated average farm price of $14.30 for 2012-2013, $12.35 for 2011-2012, and $11.30 for 2010-2011.

 

Grain Marketing Impacts

The latest WADSE and Crop Production reports send kind of a mixed message regarding grain marketing strategies. The relatively tight 2012-2013 grain supplies should keep the market for old-crop corn and soybeans relatively strong, with fairly tight local basis levels, and some good cash marketing opportunities in the next few months. The projected large 2013 corn crop, and the associated significant increase in corn carryover levels for the 2013-14 marketing year, is likely to put continued pressure on new-crop corn prices. This could limit substantial price increases during the coming growing season, similar to price increases in recent years when much tighter projected corn ending stocks existed. Price prospects for new-crop soybeans also are far less positive than in recent years, given the expected increase in 2013 production levels and the associated increase in estimated level of soybean ending stocks.

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The report also will present USDA’s initial assessment of U.S. and world crop supply and demand prospects and U.S. prices of the 2013-14 marketing year. Additionally, it will offer the first calendar year 2014 projections of U.S. livestock, poultry and dairy products.
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