Supply and Demand Report Recap

John M. Riley, Extension Economist
By John M. Riley, Extension Economist July 12, 2011 16:39

USDA released it’s monthly World Agricultural Supply and Demand Estimates (WASDE) report this morning – roughly two weeks since sending shock waves through the markets with their June 30 Acreage and Grain Stocks report.  The WASDE report was expected to reveal increased ending stocks for both the 2010/11 and 2011/12 marketing years for corn, soybeans and wheat compared to last month’s report – excluding 2011/12 soybeans.  However, ending stocks estimates were lower than the June WASDE report for corn and wheat, and lower for 2011/12 beans but less than pre-report expectations.

Current crop soybean acres were shown to be 75.2 million acres and yield was estimated at 43.4 bu/ac putting U.S. production at 3.225 billion bushels, which is lower than June’s estimate taking into account the lower acreage number.  Carry-in was raised as a result of the June 30 Grain Stocks report.  Exports were lowered due it’s slowing pace as the dollar has strengthened and demand has begun to wain.  The lower production outweighed the higher carry-in and lower demand thus ending stocks for 2011/12 fell from 190 million bushels in June to 175 this month.

Corn supplies loosened compared to June’s report as 870 million bushels are projected to be available at the end of the 2011/12 marketing year.  The Acreage report revealed more corn acres than expected and more than in the March intentions report.  (The World Agricultural Outlook Board – the conglomerate body that oversees the WASDE report figures – chose to stick with current acreage and yield values related to the U.S. corn crop, although a second acreage survey is underway for areas impacted by recent flooding along the Missouri River.)  The higher acreage number and higher carry-in resulting from the stocks report lead to an increase in total supply to 14.37 billion bushels, up from 13.95 in June.  Some minor changes to corn demand increased overall corn use to 13.5 billion bushels versus 13.255 in June.

Cotton ending stocks for the 2011/12 crop were raised in this month’s WASDE report.  June’s Acreage report revealed that 13.73 million acres were planted to cotton which was almost 10% more than the March intentions number and 25% more than last year.  The higher acreage value carried little impact given the extreme drought conditions currently plaguing the majority of cotton acres.  USDA increased the abandonment rate from 20% in June to 30% in this month’s report thus only 9.6 million acres are projected to be harvested versus 10.2 last month.  The lower harvested acreage combined with a projected 800 pounds of lint per acre equates to 16 million bales of U.S. cotton.  The dip in production was equally offset by a reduction in demand.  Ending stocks came in at 3 million bales as a result of carry-in from 2010/11 being bumped by 0.5 million bales.

Rice saw it’s supply estimate cut with fewer acres than reported in June as well a a larger abandonment rate.  Carry-in was also reduced for the 2011/12 crop, which when added to the production decrease resulted in 17.5 million hundredweight (mcwt) less available supply.  Although demand for new crop rice was lowered slightly, it did not offset the supply reductions and ending stocks are now forecast at 29.6 mcwt versus 42.1 in June.

Today’s report bode well for row crops.  The lower than expected ending stocks for most of the commodities discussed here helped push prices higher on the day – with the exception for cotton which has been under pressure for the past few weeks due to weakening demand prospects.  Weather in the northern portions of the U.S. are providing some beneficial growing conditions for major corn and soybean acres.  Drought conditions are wrecking havoc on the southwestern and southeastern U.S.  and if these persist prices for crops more pronounced in these regions could benefit (i.e., cotton and rice).

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John M. Riley, Extension Economist
By John M. Riley, Extension Economist July 12, 2011 16:39
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