U.S. corn stockpiles at the beginning of December were nearly 7 percent smaller than a year earlier after ethanol producers ramped up to record levels and the 2011 harvest fell short of expectations, according to grain market analysts.
Nationwide corn supplies totaled 9.39 billion bushels as of Dec. 1, based on a survey of 17 analysts conducted by Thomson Reuters ahead of the U.S. Department of Agriculture’s quarterly Grain Stocks report, scheduled for Jan. 12. A year earlier, there were 10.06 billion bushels on hand.
The USDA’s stocks number likely will reinforce the outlook for historically tight corn inventories and high feed costs for beef, dairy and pork producers this year. Corn supplies will be among several closely-followed numbers in four USDA reports scheduled to be released Jan. 12.
Many analysts also expect the USDA to trim slightly the size of the 2011 U.S. corn harvest and cut estimates for South America’s corn and soybean harvest after extreme heat and dryness hurt crops over the past couple months.
The following are brief summaries of trade expectations for the four USDA reports:
After corn inventories came out unexpectedly high in the USDA’s previous quarterly report in September, analysts are wary of a potential bullish surprise.
Corn supplies as of Sept. 1 totaled 1.13 billion bushels, the USDA said at the end of that month, 17 percent higher than the average analyst estimate. But many analysts were skeptical of the USDA’s Sept. 1 figure, saying supplies couldn’t possibly be that large in light of smaller crops. Grain stocks, according to analyst Jason ward, is the “big wild card” of the Jan. 12 reports.
The USDA “has been kicking a 300-million-bushel error down the road for many reports now,” Ward said in an e-mail. He’s with Northstar Commodity Investment Co. in Minneapolis.
After USDA analysts added to corn stocks in September, “many believe they will take it away in this report,” Ward said. It’s “obviously bullish” for prices if that happens.
If supplies were as large as the USDA reported, “where is all the corn?” Ward said. “We have elevators searching for corn and farmers can’t hold that much old crop and new crop as well, can they?”
The USDA is expected to make further cuts in what is expected to be the agency’s final adjustments for the 2011 corn crop.
U.S. farmers harvested about 12.27 billion bushels of corn last year, according to the Reuters survey, down from the USDA’s previous estimate, 12.31 billion bushels, released in November. The crop would be 1.4 percent below the 12.45 billion bushels harvested in 2010, based on the survey.
Average corn yields may drop to 146.2 bushels an acre from the eight-year low of 146.7 bushels an acre the USDA estimated previously, according to the survey. The 2010 crop averaged 152.8 bushels an acre.
The soybean harvest will total 3.048 billion bushels, based on the survey, up slightly from the 3.046 billion bushels the USDA estimated in November. Still, the crop would be down 8.5 percent from 3.33 billion bushels in 2010.
Corn and soybean crops last year were hampered by adverse weather in parts of the Midwest, as a wet conditions delayed fieldwork over the spring and a heat wave baked fields during July. The weather problems contributed to a corn market rally that sent futures to an all-time high near $8 a bushel in June.
Supply and Demand
Serious drought problems are affecting nearly half of Argentina’s corn and soybean cropland, and report indicate “irreparable” damage has already happened, according to Doane Advisory Services. Brazil’s crops have also been hurt by heat and dryness.
As a result, Doane expects the USDA’s next monthly Supply and Demand update will reveal a reduction in the forecast for Argentina’s corn crop of 4 million to 5 million metric tons from the current estimate, 29 million metric tons, or 1.14 billion bushels.
Brazil’s corn crop, which the USDA pegged at 61 million metric tons, may be cut by 1.5 million to 2 million metric tons.
“South American weather is the dominant market factor in the corn market,” Doane said in a Jan. 6 report. Argentina had adverse weather and subpar yields in four of the past five years, Doane said. “Lower South American production will translate into stronger export demand for U.S. corn later this year and into 2012-13.”
South America’s weather troubles triggered buying in Chicago’s grain futures markets, sending corn futures up 13 percent from nine-month lows reached in mid-December. In trading Jan. 9, March corn futures rose 8 ½ cents to $6.52 a bushel.
The Argentina and Brazil crop estimates may influence the decisions farmers in the U.S. will make on which crops to plant this year, said Mike North, senior risk management advisor with First Capitol Ag.
“The question mark at this point is how the USDA approaches recent dry weather in South America and its impact on corn and soybean production,” North said. “Those estimates will temper much of the discussion concerning direction of balance sheets going into the spring planting season in the U.S.
With planting in the South likely to begin in February, “any perceived shortage for one crop or the other can have an impact on ‘swing’ acres,” North said.
Winter Wheat Seedings
U.S. farmers planted about 40.93 million acres of winter wheat for harvest in 2012, according to the Reuters survey, up 0.7 percent from 40.65 million acres in 2011.
Much of the expected increase stems from higher hard red winter wheat plantings in Kansas and other Plains states. Hard red winter wheat seedings are expected to rise 3.4 percent to 29.44 million acres.
Winter wheat production “took a real hit’ in the Plains last year, and the crop this year may produce a below-normal harvest as well, Doane said.
“However, key growing areas in Texas, Oklahoma and Kansas got some much needed moisture at planting time in the fall and, with a little help this spring, yields could be higher this summer,” Doane said in a report.