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Written by: Kent Thiesse

On February 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 2012-13, compared to the January estimates. The projected 2012-13 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 2011-12 marketing year were 932 million bushels, and were just over 1.1 billion bushels at the end of the 2010-11 crop year. The all important corn “stocks-to-use” ratio for 2012-13 is estimated to be near 5.6 percent by the end of the current marketing year, which is slightly higher than the lowest ever stocks-to-use percentage of 5.0 percent in 1995-96. 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 February 8 report came in the form of an expected decrease of 50 million bushels in corn exports for 2012-13. The estimated 900 million bushels of U.S. corn exports for 2012-13 would be the lowest level of corn exports since the 1971-72 crop year. By comparison corn export levels were over 1.5 billion bushels for 2011-12 and over 1.8 billion bushels in 2010-11. The latest WADSE Report held expected corn usage for ethanol production in 2012-13 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 bushels per acre, which compares to 147.2 bushels per acre in 2011, 152.8 bushels per acre in 2010, and a trend-line yield above 160 bushels per acre. Total corn production dropped from over 12.4 billion bushels in 2010 and 2011 to near 10.8 billion bushels in 2012. 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.


USDA is currently estimating U.S. on-farm corn prices for 2012-13 marketing year in a range of $6.75-$7.65 per bushel, or and average of $7.20 per bushel, which is down from an average of $7.40 per bushel in the January USDA Report. The 2012-13 marketing year is for corn raised in 2012, and runs from September 1, 2012 through August 31, 2013. By comparison, the average U.S. on-farm market price for corn for the 2011-12 marketing year was $6.22 per bushel, and was $5.18 per bushel for the 2010-11 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. The expected increase in corn acreage, and the likelihood of improved U.S. corn yields in 2013, along with an increasing global supply of feed grains, will continue to put pressure on the new crop corn market for 2013. If the USDA March Planting Intentions Report comes out with higher than expected planted corn acres, it could place additional pressure on the new crop corn market. 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 2013-14, and 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 WASDE Report released by USDA on February 8 lowered the expected soybean carryover by 10 million bushels for 2012-13 to 125 million bushels, as compared the January estimate of 135 million bushels. This compares to soybean ending stocks of 169 million bushels for 2011-12 and 215 million bushels for 2010-11. The estimated total soybean usage for 2012-13 is 3.08 billion bushels, which is down from 3.15 billion bushels in 2011-12 and 3.28 billion bushels in 2010-11. Soybean exports for 2012-13 are estimated at 1.34 billion bushels, compared to 1.36 billion bushels in 2011-12 and 1.50 billion bushels in 2010-11. The February report increased the level of soybean crushings in the U.S. by 10 million bushels from a month earlier, but the total amount of expected crushings is still well below the levels of the two previous years.


USDA is now estimating on-farm soybean market prices for the 2012-13 marketing year in a range of $13.55-$15.05 per bushel, or an average of $14.30 per bushel, which is an increase of $.05 per bushel from the January estimate. By comparison, the average U.S. on-farm market price for soybeans for the 2011-12 marketing year was $12.50 per bushel, and was $11.30 per bushel for the 2010-11 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.