Corn, soybean picture comes into focus

by Ron Sterk
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The U.S. 2013 grain and oilseed supply and demand picture became far clearer after the U.S. Department of Agriculture on Nov. 8 released its Crop Production and World Agricultural Supply and Demand Estimates reports for the first time since September. The department raised its forecasts for corn, wheat and soybean production and ending stocks. The increases were expected, with the exception of wheat, but most fell short of the gains many had anticipated.

The corn numbers were the most anticipated with a record large crop already forecast in September and anecdotal reports of higher-than-expected yields filling the void during the partial federal government shutdown in October when no “official” data were available. Trade expectations for 2013 production ranged from 13,421 million to 14,330 million bus and averaged 14,022 million bus. Expectations for Sept. 1, 2014, carryover ranged from 1,904 million to 2,292 million bus and averaged 2,056 million bus.

The U.S.D.A. numbers came in below the trade averages with production forecast at 13,989 million bus, up 1% from September and up 30% from 2012, and carryover at 1,887 million bus, up 2% and up 129%, respectively.

With 84% of the crop in the 18 major states harvested as of Nov. 10, there appears little to stand in the way of achieving the record 2013 crop, which would surpass the 2009 record of 13,092 million bus by 7% and the recent five-year average of 12,159 million bus by 15%.

Because the U.S.D.A. numbers “missed” expectations, corn futures prices traded higher after the report, with some analysts suggesting the nearby December futures price may have bottomed at $4.15½ a bu on Nov. 8, the day the reports were released. The December price climbed 22½c, or 5%, to a high of $4.38 a bu on Nov. 12, settling into a range of $4.30@4.35 as the week progressed.

Even if corn prices have bottomed, the fact remains they are down about $3 a bu, or 40%, from a year ago, which has spurred demand from domestic livestock feeders and ethanol producers and from foreign buyers. In its WASDE the U.S.D.A. projected 2013-14 domestic feed and residual use of corn at 5,200 million bus, up 100 million from the September forecast and up 867 million, or 20%, from 2012-13. Exports were forecast at 1,400 million bus, up 175 million from September and up 669 million, or 92%, from 2012-13. Use of corn for ethanol was unchanged from September at 4,900 million bus, but up 5% from 2012-13.

Low corn prices have been a boon to ethanol producers’ margins, prompting the recent reopening of facilities that had been shuttered for months if not years.

Ample corn supplies and lower prices also have been a factor in corn refiners cutting initial offering prices for 2014 corn sweeteners by about 10% from 2013 contracted levels. Although buyers want a larger price cut, it will be the first year-over-year price reduction since 2010.

While not as dramatic as corn, the U.S.D.A. also boosted its soybean numbers from September. The 2013 crop was forecast at 3,258 million bus, up 3% from September and up 7% from 2012. The number was above the average trade expectation of 3,225 million bus but fell well within the range of 3,123 million to 3,293 million bus. Carryover on Sept. 1, 2014, was projected at 170 million bus, up 13% from September and up 21% from 2013 but below the average trade expectation of 183 million bus.

If realized the 2013 soybean crop will be the third largest on record and will be 3% above the recent five-year average production of 3,149 million bus. The crop was 91% combined as of Nov. 10, the U.S.D.A. said in its Crop Progress report.

The U.S.D.A. lowered its projected average farm price of soybeans by 35c for 2013-14, to $11.15@13.15 a bu, compared with $14.40 a bu in 2012-13 and $12.50 a bu in 2011-12, but soybean futures prices have seen less pressure than corn values mainly due to strong export demand. Nearby January soybean futures were trading around $13.10 a bu last week, up about 60c, or 5%, from lows set Nov. 5. But prices were down only about 75c a bu, or 5%, from a year earlier compared to the 40% year-over-year drop in corn futures.

The U.S.D.A. projected 2013-14 exports of U.S. soybeans at 1,450 million bus in its Nov. 8 WASDE, up 6% from its September projection and up 10% from 2012-13. Domestic soybean use (crushed for oil and meal) was projected at 1,685 million bus, up 2% from September but slightly below 2012-13 use of 1,689 million bus.

The soy complex will face an interesting year as strong demand for soybean meal (from domestic livestock and poultry growers and foreign buyers) will encourage soybean crush, but the accompanying larger soybean oil supplies may have trouble finding buyers, not the least of which has been complicated by the U.S. Food and Drug Administration’s recent decision to remove the generally recognized as safe status from partially hydrogenated oils (mainly soybean oil).

While the U.S.D.A. projected total soybean meal use in 2013-14 up slightly from 2012-13, it projected total soybean oil use down 6% from the prior year, with domestic use for food, feed and other down 8% and exports down 48%. Soybean oil used to make biodiesel is expected to increase 22% from 2012-13.
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