REPORT OVERVIEW
U.S. farmers are on track to produce record-high corn and soybean crops this fall, USDA forecast in its August crop production report released early Thursday, with 13.365 billion bushels of corn and 3.433 billion bushels of soybeans.
Average corn yield is forecast at a record-high 165 bushels per acre, and soybean yield is forecast at 44 bpa, even with last year.
These expected increases in production are offset by increases in demand, leaving ending stocks for corn down from last month and soybean ending stocks unchanged.
“It was a mixed bag from USDA Thursday morning and really comes down to what traders decide to focus on,” said DTN Analyst John Sanow.
On the production side, the numbers should be considered bearish for soybeans and corn, as both came in above the average estimate and are record large, Sanow said. Wheat should be considered neutral, he said, as USDA’s estimate was slightly below the average pre-report estimate.
“If traders instead focus on ending stocks, the market should find support as demand continues to improve, most notably in wheat, where exports were increased 200 mb in response to the Russian drought,” Sanow said.
Traders may be looking closely at world wheat supply and demand numbers, following the recent volatility in the wheat markets. USDA cut both world production and ending stocks for 2010/11, and lowered its estimate for Russian wheat production to 45 million metric tons, from 53 MMT in July. Those numbers are within the range of trade expectations.
US CROP PRODUCTION
Forecasted corn yields are higher than last year across the upper Mississippi Valley and upper Great Lakes region where moderate temperatures and adequate soil moisture provided favorable growing conditions, USDA stated. Expected yields were also higher compared with last year across the southern Great Plains and lower Mississippi Valley, while yield prospects are lower in the Atlantic Coast region and Tennessee Valley due to above-normal temperatures and dry conditions.
For soybeans, yields are forecast higher across the northern tier states, with increases of 4 bushels or more in Minnesota, North Dakota, Pennsylvania and Wisconsin. With the exception of Illinois and South Carolina, yields are forecast down or unchanged across the central part of the soybean growing region, and Delaware, Maryland and Virginia are all expecting yields down more than 10 bushels per acre from 2009 due to very hot and dry weather this summer. Yields are forecast up by 9 bpa in Texas, and yield increases are expected in the Delta.
All cotton production is forecast at 18.5 million bales, up 52 percent from last year, with harvested acreage expected to increase 41 percent over a year ago.
For the crop production report, USDA said it surveyed about 27,000 farmers, updating previously reported acreage data and probable yield, and it conducted objective yield surveys in selected plots in major producing states of corn, cotton, soybeans and wheat, to determine plant population and other measurements, depending on the maturity of the crop.
The August 1 corn objective yield data indicate the second-highest number of ears per acre on record for the 10 states in the survey.
US SUPPLY & DEMAND
In the U.S. balance sheet, USDA’s World Agricultural Outlook Board made small reductions in 2010/11 corn ending stocks, as the increases expected in production are more than offset by increases in demand.
For corn, USDA hiked old-crop ethanol and food/seed/industrial use, taking ending stocks for the 2009/10 crop down to 1.426 billion bushels, compared to 1.478 b bu estimated in July, near the low end of analysts’ guesses. For new crop, USDA is now projecting exports at 2.050 b bu, with new-crop ending stocks seen falling to 1.312 b bu. Ethanol use was left unchanged.
“Traders should pay attention to the new-crop ending stocks-to-use ratio in corn that fell below 10 percent, leaving the margin for error extremely tight in regard to production,” Sanow said.
For soybeans, USDA raised projected exports of old crop by 10 million bushels, to 1.470 b bu, and 65 million bushels for new crop, to 1.435 b bu. The changes took ending stocks for the current year to 160 m bu and left 2010/11 stocks at 360 b bu.
For U.S. wheat, USDA now puts all wheat production at 2.265 billion bushels, and 2010/11 ending stocks at 952 million bushels. The stocks number is below the average trade estimate, so this number may draw some scrutiny when traders go back to work
WORLD PRODUCTION, ENDING STOCKS
In addition to cutting world wheat production and tightening the world wheat balance sheet, USDA also cut world corn and soybean ending stocks.
World wheat ending stocks for 2010/11 are now expected at 174.76 MMT, down from 187.05 MMT in July. In addition to the reduction for Russia, USDA also lowered forecasts for production in Kazakhstan and Ukraine.
World corn ending stocks for 2010/11 are now projected at 139.20 million metric tons, down from the July estimate of 141.08 MMT, with the increases in the U.S. more than offset by decreases in Russia, Kazakhstan and the EU.
World soybean ending stocks for 2010/11 are now projected at 64.73 MMT, down from 67.76 MMT in July, with the increases in production more than offset by increased domestic crush in the U.S. and other countries.
“World ending stocks should be viewed as neutral to bullish for all three grains,” Sanow said. “Decreases were seen for wheat at 12.29 mmt, corn 1.88 mmt and soybeans 3.03 mmt for the 2010-2011 marketing year as the ending stocks-to-use ratios tighten up further.”
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Posted with DTN permission by Haylie Shipp
