Corn and soybean markets continue to be filled with uncertainty due to the lasting effects of the lingering drought, but there is now a high level of certainty about the size of the crops that persevered against the long, dry summer of 2012, according to analysts at the American Farm Bureau Federation.
Those are just a few of the observations made by Todd Davis, AFBF senior economist following the Agriculture Department's release of four major reports on Friday—World Agricultural Supply and Demand Estimates, Crop Production, Grain Stocks and Winter Wheat Seedings.
"This is like Super Bowl Sunday for the grain and oil seed markets," Davis said. "This is the last word on 2012 production. It sets the table on the supply-side for the rest of the marketing year, and it gives farmers some insight as they finalize spring cropping plans."
According to Davis, corn and soybean markets are at tight levels, characterized by higher prices that are both curbing demand and providing competing incentives for farmers to sort through for those two crops this year.
"The lingering drought is of concern to the markets, as average or above average yields are needed in 2013 to allow the market to rebuild stocks to levels that will remove some of the uncertainty in the market," Davis said.
The 2012-2013 corn ending stocks are projected at 602 million bushels, which equates to about 20 days of corn available on Sept. 1, 2013. Those tighter stocks are supporting a projected U.S. marketing-year average price of $7.40 per bushel. The pre-report estimates had expected ending stocks at 675 million bushels, which makes the January report of 602 million bushels bullish for the corn market, according to Davis.
The 2012 U.S. corn yield is projected at 123.4 bushels per acre which is 23.8 bushels less than the 2011 crop, but the yield projection is up 1.1 bushels from the November 2012 projections. Davis said the increase in projected yield is tempered by a reduction in harvested acres. The January projections reduced harvested acres by 300,000, to 87.4 million harvested acres.
Overall, the 2012 corn crop is projected at 10.78 billion bushels, which is 1.578 billion bushels less than the 2011 crop. Total corn use is projected at 11.267 billion bushels, down 1.26 billion bushels from the 2011-2012 marketing year. Feed demand is down 98 million bushels from 2011-2012 and is projected at 4.45 billion; exports are 950 million and are the lowest since 1971-1972. Ethanol demand is projected at 4.5 billion and is 511 million less than 2011-2012 reflecting the ethanol markets adjustment to higher corn prices.
"Ten percent of the planted corn acres were not harvested for grain, which is a relatively low level of abandonment given the extreme damage caused by the drought," Davis said. "But, the overall smaller crop is reducing demand across the board."
On the soybean side, ending stocks are projected at 135 million bushels, for a stocks-to-use ratio of 4.4%, which is only a 16-day supply that would be available on Sept. 1, 2013. Those tight stock levels are supporting projected U.S. prices of $14.25 per bushel.
The 2012 soybean crop is projected at 3.015 billion bushels, 80 million bushels less than the 2011 crop. The 2012 U.S. soybean yield is projected at 39.6 bushels per acre which is 0.3 bushels less than the 2011 crop.
Davis said total soybean use is projected at 3.07 billion bushels, down 85 million bushels from the 2011-2012 marketing year. Higher prices, however, are not curbing soybean demand, according to Davis. Soybeans crush levels are at 1.605 billion bushels, an increase from the December projections. Soybean exports are at 1.345 billion bushels, just 17 million bushels less than the 2011-2012 marketing year.
"The series of reports released on Friday provides the last supply information for the 2012 crop," Davis said. "Now, the market will place greater focus on the Southern Hemisphere's corn, soybean and wheat crops."
He said the January report increased projected Brazilian soybean production to 82.5 million metric tons, but reduced Argentine soybean production to 54 million metric tons. If realized, this would be a 28% increase in soybean production from last year for those two nations, according to Davis.