On Jan. 11, the USDA released a series of reports that provide important fundamental information for the crop markets. The information included the final estimate of the size of the 2012 United States corn and soybean crops, estimates of Dec. 1 crop inventories, a winter wheat seedings estimate and updated U.S. and world supply and consumption forecasts for the current marketing year. University of Illinois agricultural economist Darrel Good offers his analysis of the reports.
“For corn, the 2012 U.S. crop is estimated at 10.78 billion bushels, 55 million larger than the November forecast,” Good says. “The estimate of planted acreage of corn for all purposes was increased by 209,000 acres, the estimate of acreage harvested for grain was reduced by 346,000 acres and the yield estimate was increased by 1.1 bu./acre. The production estimate was larger than the pre-report average trade guess of just over 10.6 billion bushels, but the estimate of Dec. 1, 2012, stocks of corn was actually much smaller than the average guess.
“Stocks were estimated at a nine-year low of 8.03 billion bushels, compared to the average guess of about 8.2 billion. The stocks estimate implies that feed and residual use of corn has not slowed as a result of the small crop and high prices that began in June of last year. Because of the harvest of a large quantity of corn before the marketing year began on Sept.1, 2012, feed and residual use should be evaluated over the six-month period from June through November 2012. For that period, feed and residual use of corn totaled about 2.39 billion bushels, about 110 million more than use during the period from June through November 2011. Such an increase is a little surprising but only because feed and residual use of wheat during that period was 125 million bushels larger than use in the previous year. As we have pointed out before, total grain feeding has been supported by only a very modest cut in livestock numbers and a sharp decline in the production of distillers’ grain,” Good says.
Unlike other years of small production and high corn prices, Good says that feed use of corn has remained large. “Such a high rate of use has been possible because corn used for ethanol production has declined about 10% year over year and because exports have been almost non-existent. Exports during the first quarter of the 2012-2013 marketing year were at a 41-year low of 220 million bushels. For the year, the USDA now projects exports at a 43-year low of 950 million bushels. Year-ending stocks of corn are projected at a 17-year low of 602 million bushels, and the marketing-year average farm price is expected to be record high, in a range of $6.80-8/bu. Based on the average price received to date, it appears that the average for the year will be near the low end of that range,” he says.