The numbers seemed to be bearish on the surface, but the market liked the outcome of USDA’s October Crop Production and Supply-Demand Reports. In essence, USDA raised harvested acreage for both corn and beans increasing total production, but also raised demand which means the market still has rationing to do.
USDA’s Crop Production Report for October increased harvested acreage by 300,000 to 87.721 million. Combined with a drop in the national average yield to 122 bushels per acre, that resulted in total estimated production of 10.706 billion bushels. The 122 bushels per acre is 24% below the trend yield for 2012. Lower yields in Illinois are only partly offset by increases for Minnesota and North Dakota. USDA said, “U.S. corn use for 2012/13 is lowered with a 100-million-bushel reduction in projected exports. In the USDA’s World Agricultural Supply and Demand Estimate for October corn exports are lowered based on the slow pace of sales to date and strong competition from Brazil. Corn ending stocks for 2012/13 are projected 114 million bushels lower at 619 million, which is 5.6% of use. The season-average farm price for corn is lowered 10 cents on both ends of the range to $7.10 to $8.50 per bushel based on early season cash and futures prices and prices available for forward delivery through early 2013.”
The harvested acreage estimate of 87.721 million acres, is close to the 87.4 million forecast in September, in an effort to balance production to meet demand. However, that sets up the opportunity to refine the harvested acres number in the November report. Since 90% of the crop was mature when the survey was taken, there will be less possibility of yield adjustments than acreage adjustments in the November and January reports.
Globally, “coarse grain supplies for 2012/13 are projected 11.0 million tons lower mostly reflecting reduced corn beginning stocks in the United States and Brazil. Brazil beginning stocks are lowered with 2011/12 exports increased 4.5 million tons. Global corn production for 2012/13 is lowered 2.0 million tons with reductions for EU-27, Serbia, and the United States. Global 2012/13 corn exports are lowered 1.1 million tons this month with the U.S. reduction partly offset by a 1.0-million-ton increase for Brazil and a 0.5-million-ton increase for India. Imports for EU-27 are raised 2.0 million tons with the smaller crop. Global corn feeding is down 1.4 million tons.” Global corn stocks are now at a 50 day supply, the tightest in 39 years, and over half of it is in China.