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Wednesday, July 11, 2012

USDA Does Make Some Major Cuts After All!



 

USDA responded to the drought in a major way Wednesday morning in the World Agricultural Supply and Demand Estimate (WASDE) report by cutting 1.82 billion bushels from US corn production.  In brief, the National Agricultural Statistics Service (NASS) staff reduced the estimated yield from 166 bushels per acre to 146 bushels, lowering overall production to 13.9 billion bushels on 88.9 million acres to be harvested.  That was a major and unexpected shift for a July Supply-Demand Report, and sent the market upward.
 
The July 11 WASDE report http://www.usda.gov/oce/commodity/wasde/latest.pdf pushed feed grain production, including corn, sharply lower because of the adverse weather conditions.  USDA said, “Persistent and extreme June dryness across the central and eastern Corn Belt and extreme late June and early July heat from the central Plains to the Ohio River Valley have substantially lowered yield prospects across most of the major growing regions.”  Even though the first field survey of crops will not occur until August, the NASS staff reduced the corn production estimate to 12.970 billion bushels, down from the 14.790 billion estimate in the June report. Along with a 903 million bushel carry in from the 2011 crop, the total supply will be 13.903 billion.
 
That production would have barely covered the total projected use of 13.775 billion projected in the June WASDE report.  However, the USDA statisticians dialed back their expected use.  Feed and residual was cut from 5.450 billion to 4.8 billion bushels. Ethanol use was cut from 5 billion to 4.9 billion. And Exports were cut from 1.9 to 1.6 billion bushels.  The total us is now estimated at 12.720 billion bushels. The carryout for the new crop, in August of 2013, was lowered from 1.881 billion to 1.183 billion. That is a 9.3% stocks to use ratio, and raised the expected average price for the new crop to a range of $5.40 to $6.40.
 
Globally,USDA lowered coarse grain supplies by 47.6 million tons, nearly all of which is the result of lower US production.  Global ending stocks declined 21.7 million tons.
 
For soybeans, USDA lowered its production estimate to 3.050 billion bushels.  That is down only 155 million bushels from the June estimate, because USDA raised its estimate of harvested acreage from 73 to 75.3 million.  However, the USDA did cut the estimated yield from 43.9 bushels per acre in June to 40.5 bushels per acre, and said, “The drop reflects sharply declining crop conditions resulting from limited rainfall since early April coupled with excessive heat across much of the producing area in late June and early July.”  The soybean balance sheet reflects a 35 million bushel reduction in the crush to 1.61 billion.  Exports were reduced by 115 million bushels to 1.37 billion.  Ending stocks were cut 10 million to 130 million in August of 2013.  The carryover reflects a 4.2% stocks to use ratio and the season average price was raised $1 to a range of $13 to $15.
 
Globally, soybean production was estimated at 267 million tons, down 3.9 million because of lower US production.  Ending stocks are projected at 63 million tons, down 2.7 million from reduced supplies in the US and South America.
 
 

Posted by Stu Ellis on 07/11 at 08:44 AM | Permalink

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