World Grain - May 2013 - 42

FEATURE: LARGER SUPPLIES, LOWER PRICES

pre-report forecasts and 7% above the
average of those forecasts.
“The difference between the USDA’s
March 2013 (corn) stocks estimate . . .
and the average trade guess was about
370 million bushels, one of the largest
differences in the past 30 years,” Darrel
Good, a University of Illinois agricultural economist, said in his Weekly
Outlook after the report.
Some surmised that actual 2012 corn
production may have been larger than
the USDA’s January estimate of 10.78
billion bushels. But the cause for the
miss was most likely related to overlyoptimistic use estimates, which high
prices clearly affected, and indirectly to
difﬁculty in measuring on-farm storage
of corn. The corn use picture was muddled even more because of increased
feeding of wheat this year, but the March
1 wheat stocks number also was well
above expectations. The USDA said estimated corn use during the December
2012-February 2013 period was 2.63
billion bushels, down 27%, or almost 1
billion bushels, from the same period a
year earlier.
“Market participants form expectations for the quarterly stocks estimates
based on the level of stocks at the beginning of the quarter and a projection
of use during the quarter,” Good said.
“Exports and domestic processing uses
of corn during the quarter can be projected fairly closely. Surprises in the
USDA estimates, then, mean that feed
and residual use during the quarter deviated from market expectations.
“The implied rate of feed and residual
use of corn in the ﬁrst half, and particularly in the second quarter, of the 201213 marketing year is quite low,” Good
said. “The slow rate . . . does not seem
consistent with livestock numbers, a
sharp reduction in the production of distillers’ grains and the implied negative
feed and residual use of wheat during
the same six-month period.”
Dan Basse, market research manager at AgResource Consulting Group,
Chicago, Illinois, U.S., agreed that the
USDA’s feed use numbers appeared
42

low, saying he saw “no evidence” of
less feed demand. He saw tight old crop
supplies as supportive to prices and
suggested old crop corn prices had bottomed, in part because of improved demand from the ethanol sector.
In its March 28 Prospective Plantings
report, the USDA said farmers indicated they intend to plant 97.3 million acres of corn in 2013, up slightly
from 97.2 million acres in 2012 and
near trade expectations that averaged
97.3 million acres.
“If realized, this will represent the
highest planted acreage in the United
States since 1936, when an estimated 102
million acres were planted,” the USDA
said. “Expected returns for corn are again
historically high going into 2013.”
Meyers expected the USDA will trim
forecast yields slightly due to the late
start to planting, but that yields still will
average around 160 bushels an acre,
and with the large planted area, will
result in a record-large crop of around
14.5 billion bushels. As a result, he said
December corn futures prices may fall
below $4 a bushel, although trading will
be “choppy getting there.”
The U.S. corn carryover on Sept.
1, 2013, was projected at 757 million
bushels, up 20% from 632 million bushels projected in March but down 23%
from 989 million bushels in 2012, the
USDA said in its April 10 WASDE.
The USDA 2013 corn carryover number was well below the average of trade
expectations of 824 million bushels.
Feed and residual use was projected
at 4.4 billion bushels, down 150 million bushels, or 3%, from 4.55 billion
bushels as projected in March and down
145 million bushels from 4.545 million bushels in 2011-12. Food, seed and
industrial use was projected at 5.937
billion bushels, up 50 million bushels
from 5.887 billion bushels as forecast
in March due to a 50-million-bushel
increase in projected use of corn for
ethanol and byproducts at 4.55 billion
bushels. Projected use of corn for food
and seed was unchanged at 1.387 million bushels.

Meyers said he was surprised the
USDA didn’t reduce the feed and residual number more, which would put 2013
corn carryover closer to 1 billion bushels.
U.S. corn exports in 2012-13 were
projected at 800 million bushels, down
3% from 825 million bushels in March
and down 48% from 1.543 million bushels in 2011-12.
The average farm price of corn was
projected to range from $6.65 to $7.15
a bushel in 2012-13, down from $6.75$7.45 as projected in March but still
above $6.22 a bushel in 2011-12 and
$5.18 a bushel in 2010-11.
SOYBEAN DEMAND REMAINS STRONG
The USDA’s March 1 soybean
stocks estimate of 999 million bushels, which was down 27% from 2012,
still came in well above trade expectations. But it took a backseat to the corn
and wheat numbers. Also somewhat of
a surprise to the trade was the USDA’s
estimated Sept. 1, 2013 soybean carryover of 125 million bushels, which
was below trade expectations.
As soybean planting season approached, temperatures and precipitation looked very different from last
spring, leading market analysts to predict a return to trend line yields and the
possibility of production of more than
3 billion bushels against a backdrop of
continuing strong export demand. Yet,
despite hopes for a return to more normal growing conditions and prospects
for larger carryover in 2013, experts
believe nearly “maxed-out” domestic
acreage and a continuing strong export
market will keep soybean prices in double digits.
“Exports are going to stay strong in
China. The population has grown used
to eating chicken and pork and they are
not going to turn back,” Jack Scoville,
vice-president, Price Future Group in
Chicago, said.
While 2012 was characterized by
warm temperatures, early planting and
the devastation of a 50-year drought, the
approach of the 2013 soybean planting
season in early May featured coolerMay 2013 / World Grain / www.World-Grain.com

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World Grain - May 2013

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