On Feb. 8, USDA released the latest World Agriculture Supply and Demand Estimates (WASDE) Report, which showed slight increase in the expected U.S. corn ending stocks for 2012-2013, compared to the January estimates. The projected 2012-2013 corn ending stocks are now estimated at 632 million bushels, as compared to 602 million bushels in the January report. By comparison, corn ending stocks at the end of 2011-2012 marketing year were 932 million bushels, and were just over 1.1 billion bushels at the end of the 2010-2011 crop year. The all important corn “stocks-to-use” ratio for 2012-2013 is estimated to be near 5.6% by the end of the current marketing year, which is slightly higher than the lowest ever stocks-to-use percentage of 5.0% in 1995-1996. That will put the corn stocks down to slightly over 20 days of usage, which is still quite tight.
The increase in corn ending stocks projected in the Feb. 8 report came in the form of an expected decrease of 50 million bushels in corn exports for 2012-2013. The estimated 900 million bushels of U.S. corn exports for 2012-2013 would be the lowest level of corn exports since the 1971-1972 crop year. By comparison corn export levels were over 1.5 billion bushels for 2011-2012 and over 1.8 billion bushels in 2010-2011. Export demand for U.S. corn has been reduced due to continued higher price levels for U.S. corn, as well as by increased feed grain production in South America and other parts of the world. The latest WADSE held expected corn usage for ethanol production in 2012-2013 at 4.5 billion bushels, and for feed usage at 4.45 billion bushels; however, corn usage for food, seed and industrial uses was increased by 20 million bushels, compared to the January estimates.
The very tight current supplies of corn are a combination of below trend-line corn yields in the U.S. in the past three years, and the significantly lower U.S. corn yields in 2012, as a result of the major drought in much of the Corn Belt last year. The average U.S. corn yield for 2012 was only 123.4 bu./acre, which compares to 147.2 bu. in 2011, 152.8 bu. in 2010, and a trend-line yield above 160 bu. Total corn production dropped from over 12.4 billion bushels in 2010 and 2011 to near 10.8 billion bushels in 2012.
USDA is currently estimating U.S. on-farm corn prices for 2012-2013 marketing year in a range of $6.75-7.65/bu. – an average of $7.20/bu., which is down from an average of $7.40 in the January USDA report. The 2012-2013 marketing year is for corn grown in 2012, and runs from Sept. 1, 2012 through Aug. 31, 2013. By comparison, the average U.S. on-farm market price for corn for the 2011-2012 marketing year was $6.22/bu., and was $5.18 for the 2010-2011 marketing year.
The latest USDA report was viewed as neutral to bearish by most grain marketing analysts. Most analysts feel that the corn market had already factored in the fairly tight current supplies of corn, but are concerned with the decreased export demand for the coming year. Many analysts are projecting over 99 million acres of planted corn for 2013, compared to 97.2 million acres in 2012. If the USDA March Planting Intentions Report comes out with even higher than expected planted corn acres, it could place additional pressure on the new crop corn market. Some analysts have estimated that a 2013 national corn yield of only 125 bu./acre could meet the expected demand for the year. Higher corn acreage in 2013, along with more normal U.S. corn yields, could lead to a large increase in projected corn ending stocks for 2013-2014. These factors together with an increasing global supply of corn will likely lead to some significant downward pressure on the corn market later in 2013. On the flip side, continued drought conditions in the Upper Midwest could strengthen new crop corn prices.
The Feb. 8 WASDE Report lowered the expected soybean carryover by 10 million bushels for 2012-2013 to 125 million bushels, as compared the January estimate of 135 million bushels. This compares to soybean ending stocks of 169 million bushels for 2011-2012 and 215 million bushels for 2010-2011. The estimated total soybean usage for 2012-2013 is 3.08 billion bushels, which is down from 3.15 billion bushels in 2011-2012 and 3.28 billion bushels in 2010-2011. Soybean exports for 2012-2013 are estimated at 1.34 billion bushels, compared to 1.36 billion bushels in 2011-2012 and 1.50 billion bushels in 2010-2011. The February report increased the level of soybean crushing in the U.S. by 10 million bushels from a month earlier, but the total amount of expected crushing is still well below the levels of the two previous years.
USDA is now estimating on-farm soybean market prices for the 2012-2013 marketing year in a range of $13.55-15.05/bu. – or an average of $14.30/bu., which is an increase of 5¢/bu. from the January estimate. By comparison, the average U.S. on-farm market price for soybeans for the 2011-2012 marketing year was $12.50, and was $11.30 for the 2010-2011 marketing year. Most grain marketing analysts expect soybean market prices for the remaining 2012 crop year to remain quite strong, with a very favorable local basis situation in many areas of the U.S.
Similar to corn, new-crop soybean prices will be dependent of the 2013 planted acres in the U.S. and the growing conditions during the upcoming crop year, along with world soybean production and demand. Soybean prices may not be quite as volatile as corn prices, due to soybean demand levels being more stable than corn, and expectations for lower swings in 2013 U.S. soybean acreage and yields than is anticipated for corn.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected]