USDA reports frequently move markets and last week’s first supply/demand for the 2012 grain and oilseed crops was no exception. The day of the report, July corn closed down 20¢/bu. and cotton down 4¢/lb., while July beans closed 25¢/bu. higher and wheat 1¢ higher. Despite the immediate market reaction to the numbers, some aspects of the reports are debatable. Here are a few numbers Brock analysts expect to change.
Corn yield:We have no argument with USDA’s 166-bu. national yield. Given their 20-year trend yield of 164, and the adjustment for the early planting season, it is certainly possible. Neutral La Niña/El Niño conditions also favor a “normal” growing season. But yields almost always change, sometimes by a great deal. The season has just begun.
Soybean acreage:The rapid development of the winter wheat crop and strong soybean prices all but ensure more double-cropped beans. Ag Economist Art Barnaby told Brock Associates he thinks 20% of Kansas winter wheat acres could be double cropped this year, and one USDA statistician told us he “would not be surprised” to see an additional 2 million acres of beans in the June acreage report over the March intentions report.
Corn feed/residual:Given the huge projected corn crop, USDA dumped a whopping 900 million bushels into the feed/residual category. Feed use certainly may rise given expected lower corn prices, which will make it more competitive with wheat in the feed bunk. However, many analysts argue against such strong feed use because meat production is expected to be up only 1% for the calendar year.
But keeping in mind the residual component is what USDA’s economists use to make the numbers work out, it is not surprising the number for this category is high.
In addition, with this big a crop, individual farms and even local areas may run short of storage, leading to piles on the ground and attendant larger harvest losses. Those may come out of the residual category.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.