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The U.S. Department of Agriculture (USDA) made upward revisions to old-crop corn use and new-crop supplies in its September World Agricultural Supply and Demand Estimates (WASDE). USDA lowered carryout in old-crop corn and raised it slightly in the new-crop year.
Ending stocks in the 2012-2013 marketing year were cut by 58 million bushels on increased feed use, fuel use and exports, says Texas A&M grain analyst Mark Welch. “The lower carryover from last year, the beginning stocks number for 2013-2014, was offset by an increase in corn production,” he says. “The net increase in new-crop corn supplies is 18 million bushels.”
No changes were made to the use side of the corn balance sheet.
University of Illinois analyst Darrel Good says old-crop corn on Sept. 1 is forecast at 661 million bushels, down from the August forecast of 718 million bushels. Estimates of corn consumption during the year just ended were increased for each category of consumption, which he notes is consistent with his expectations.
The marketing year average farm price is projected in a range of $4.40 to $5.20, 10 cents lower than the August forecast. “We expect the average price to be in the lower end of that range (near the current level) and probably in a relatively narrow range, at least during the first half of the marketing year,” says Good.
According to Welch, world corn production and use numbers were little changed. Supplies are down on lower stocks and lower production. Domestic use was cut leaving ending stocks higher by 1.3 million metric tons. Days of use on hand at the end of the marketing year increased this month to a 59.6-day supply, up from 58.9 in August, but right at the 10-year average.
For soybeans, Good says the September WASDE report made only minor changes to the supply and consumption forecasts for the 2012-2013 marketing year just ended, leaving the projection of Sept. 1 stocks at 125 million bushels.
“For the current marketing year, the projection of the domestic crush was reduced by 20 million bushels and the projection of exports was reduced by 15 million bushels,” he explains. “The smaller projections reflected a combination of smaller supplies, higher prices and competition from South America. Year-ending stocks are projected at only 150 million bushels, 70 million below last month’s projection.”
The marketing year average farm price for soybeans is now projected in a range of $11.50 to $13.50, which is $1.15 higher than USDA’s August projection.
Good expects the production forecast will be reduced in October and that the average price will be in the upper half of the price range. “With a smaller crop forecast, prices would be expected to reach the highest level in October, followed by erratically lower prices during the remainder of the marketing year, assuming no substantial problems with the South American crops,” he says.
Stu Ellis, formerly with the University of Illinois and now author of the Farmgate blog, says the September report “carried a surprise” for the soybean market, as supplies diminished from “heat, lack of moisture and continued demand at bargain prices. Although USDA trimmed demand projections and raised the season-average price, the resulting small carryover at this time next year was enough for the bulls to stampeded on Chicago’s LaSalle Street, where the Board of Trade recorded a 56-cent trading range, closing at the high end.
“The low stocks estimate is what set the market afire. Due to the tighter stocks, USDA raised the estimated farm-gate price by $1.15 on each end to a range of $11.50 to $13.50. Many analysts expressed concerns that USDA can’t be realistic on soybean production and demand, cutting demand while demand is currently strong. They say it doesn’t add up. Nevertheless the USDA does not like to draw stocks down much lower than 150 million bushels. The economists say it is a strong signal to South American farmers to plant more soybeans in the next month.”
Welch also takes a look at wheat. Both U.S. and world wheat carryout numbers increased in last week’s WASDE. Minor changes to U.S. and world wheat balance sheets raised carryout-to-use ratios in both areas. The only change to U.S. wheat supply and demand was a 10-million-bushel increase in wheat imports, due to the large crop in Canada. The stocks-to-use ratio increased to 23.3 percent, up from 22.9 percent in August.
Welch says that the Wheat Outlook cited an increase in world wheat production from the International Grains Council based on improving production conditions in Canada, the European Union, Kazakhstan and Ukraine. The USDA confirmed that information in its WASDE. Total wheat production, already a record, increased another 3.5 million metric tons to 709 mmt. Use was mostly unchanged adding 3.3 million metric tons to ending stocks. The days-of-use-on-hand at the end of the marketing year for world wheat is a 91.1-day supply. The 10-year average of this measure is 91 days.
Looking at a 2014 wheat marketing plan, Welch reports that the July 2014 Kansas City wheat futures contract continues to trade around $7. The projected price for 2014 winter wheat for most production areas has been determined: $7.02—the average closing price of the July KC wheat contract from Aug. 15 through the middle of September.