June Supply and Demand Report Recap

The United States Department of Agriculture’s World Ag Outlook Board released their monthly supply and demand estimates report earlier this morning. The report was the second round of forecast for the current summer (new) crops, which is the 2012/13 marketing year.

Old crop (2011/12 marketing year) soybean demand estimates were really shaken up. Crushing demand was increased from 1.645 billion bushels (bbu) to 1.660 and export estimates were raised 20 million bushels (mbu) to 1.335 bbu. This pulled soybean ending stocks back to 175 mbu, 35 mbu below May’s estimate and 17 mbu lower than pre-report estimates. At 175 mbu carry-over and total use of 3.111 bbu the old crop stocks-to-use ratio is projected at 5.6%.

New crop soybean demand estimates were lowered as crushing and export use was smaller by 10 mbu and 20 mbu at 1.645 bbu and 1.485 bbu, respectively. These projected changes offset the smaller carry-over for the most part as 2012/13 ending stocks are forecast at 140 mbu (compared to 145 last month and 143 expected in pre-report estimates). The stocks-to-use ratio for the 2012/12 marketing year is currently projected at 4.3%, which if realized would be the lowest since the 1965/66 marketing year.

As an aside, winter wheat harvest is, like everything else this year, ahead of schedule which will likely translate into more bean acres in the upcoming June Acreage report (to be released June 29) as compared to the March Prospective Plantings report (which took many by surprise at that time).

Old crop corn estimates were unchanged at the aggregate level as total use and ending stocks were the same as the May report. Some shuffling within use categories was seen. Ethanol demand was lowered by 50 mbu, which was shifted to exports. Ending stocks were unchanged at 851 mbu, which was 25 mbu above pre-report estimates (last month similar expectations were made with the same outcome from USDA).

New crop corn estimates were unchanged across the board. Pre-report expectations looked for 2012/13 marketing year ending stocks to be 1.740 bbu. USDA pegged this at 1.881 bbu which, as mentioned, was unchanged from May’s report. Much contention surrounds the 2012 crop. Early plantings pushed yield estimates higher (current USDA projected yield of 166 bu/ac is higher than the trend adjusted 160.5 bu/ac due to the fast pace to planting). On the other hand, the dry and hot conditions over the past few weeks has caused the crop’s condition to suffer as evidenced in the weekly Crop Condition report. Many expected this to push this month’s yield and production estimates lower. There remains a lot of growing season ahead and USDA apparently took that thought into their projections.

Old crop cotton experienced a bullish shift as exports were bumped up 0.2 million bales which pulled down ending stocks by the same amount. Ending stocks are currently projected at 3.2 million bales putting the 2011/12 marketing year stocks-to-use ratio at 21.3%.

New crop cotton brought in the lower stocks number but this was exactly offset by lower exports and thus the 2012/13 ending stocks estimate was unchanged at 4.9 million bales putting the current stocks-to-use ratio at 32.0%.