July Supply and Demand Report Shocker
The World Agricultural Outlook Board of USDA released their monthly World Agricultural Supply and Demand Estimates report (WASDE) this morning, July 11. The report revealed what most had feared, a much lower per acre yield than trend would suggest. The report currently pegs U.S. corn yield at 146 bushels per acre, down 20 bushels or 12.1% from the June report. The reported per acre yield is a sharp decline from last month’s estimate of 166 bushels per acre. Pre-report estimates expected the national yield to be 154.1 bushels per acre with the lowest expectation being 147.1. After taking into account the slight bump in acres from the June 29 Acreage report -which was negated for the most part due to an expected increase in abandoned acres- U.S. production is estimated at 12.970 billion bushels. Total available supply is not as dire due to a small upward revision in carry-over from last year’s crop, 903 million bushels versus 851 from last month, and larger expected imports. Still, the lower projected supply is expected to create some rationing in the market, thus projected demand for all categories is lowered from last month. Corn used for feed and residual purposes is currently projected at 4.8 billion bushels, down 11.9% from last month, and corn for ethanol is lower by 2.0% at 4.9 billion bushels. Collectively, these would result in a carry-over of 1.183 billion bushels, or 9.3% of total use. Pre-report expectation called for the carry-over to be 1.232 billion bushels.
The projected national average soybean yield was also trimmed. USDA is currently calling for per acre yield to be 40.5 bushels, down 3.4 bushels from last month’s report. As was the case with corn, the yield estimate is outside the low end of the range of expectations. Pre-report predictions called for the yield to be 42.3 bushels per acre with the smallest expectation at 41.3. The deteriorating conditions plaguing the corn crop are having the same ill effects on soybeans. After factoring in the estimated 75.3 million harvested acres, U.S. soybean production comes to 3.050 billion bushels, down 155 million from last month but mostly on par with 2011’s production. Demand for soybeans is expected to cool down as a result of the limited supply. Crushings and export demand is forecast at 1.610 and 1.370 billion bushels, respectively, down 2.1% and 7.7%. Carry-over is currently projected at 130 million bushels, or 4.2% of use. A stocks-to-use ratio this low will certainly keep the market on edge so look for price volatility to continue.
The report was not all gloom and doom as cotton yields were forecast slightly higher at 785 pounds per acre, up 8 pounds. Using the acreage number from the June 29 Acreage report of 12.64 million acres, and factoring in a 82.3% abandonment rate which is just below the previous five year average, total cotton production is forecast at 17 million bales. On the demand side, exports were raised from 11.8 million bales to 12.1. Domestic use, on the other hand, was lowered by 0.1 million bales. Collectively, carry-over was pulled down by 0.1 million bales to 4.8, which is 31.0% of total use. Globally, ending stocks were lowered to 72.39 million bales, down 2.12 from last month, largely due to a reduction in India’s production. Although the report did not make any large sweeping adjustments to cotton as it did with other crops the fact that the export market is potentially rebounding should be seen as a bright spot. It is doubtful that prices will return to the hey days of early 2011, but for now it does not look like they will plummet.
The current set of estimates from USDA are the last to use subjective estimates for yield. Next month’s report will be the first to factor in objective field data along with the subjective survey information.