BRIAN HOOPS
On Nov. 10, the USDA released the much-anticipated supply/demand report. The report forecast corn production at 12.9 billion bushels, down 1 percent from last month but 7 percent higher than 2008. Based on conditions as of Nov. 1, yields are expected to average 162.9 bushels per acre, down 1.3 bushels from October, but 9.0 bushels above last year.
Despite the drop in yield from October, this yield will be the highest on record if realized. Total production will be second highest on record, only behind 2007. Within the Corn
Belt, forecasted yields in Minnesota and Wisconsin increased, while Illinois, Iowa and Michigan yields decreased.
Since 1981, there have been eight previous years of corn production increases from the September to October reports. In all of those previous years, the USDA also increased production into the November report. This year will be the exception as the USDA lowered production from last month. This will still be the second largest crop in history, but the highest yield. In seven of those eight previous years, the USDA has also increased the final production figure from the November report into the final report in January.
The USDA left the old crop feed and ethanol estimates unchanged this month. The only demand revision was a 50 million bushel reduction in exports to 2.100 billion bushels. This partially offset the 97 million bushel reduction in the crop size, allowing 2009/10 ending stocks to slide 47 million bushels from last month to 1.625 billion. This still represents a nearly unchanged stocks situation from last year, but a slightly tighter stocks/usage ratio of 12.5 percent versus 13.9 percent in 2008/09.
The ending stocks revision was marginally more than the average trade estimate looking for stocks at 1.650 billion bushels.
The USDA forecast soybean production at a record high 3.32 billion bushels, up 2 percent from the October forecast and up 12 percent from last year. Based on November 1 conditions, yields are expected to average 43.3 bushels per acre, up 0.9 bushel from last month and up 3.6 bushels from 2008. If realized, this will be the highest U.S. yield on record.
Compared with last month, yields are forecast higher or unchanged in all states except Arkansas, Georgia, Iowa, Mississippi and Texas. Increases of three bushels are expected in Delaware, Indiana, Kansas and Maryland. The largest decrease in yield from the October forecast is expected in Mississippi, where excessive rain during October hindered yield expectations.
If realized, the forecasted yield in Alabama, Kansas, Kentucky, Nebraska, Ohio, and Pennsylvania will be a record high and the forecasted yield in Georgia, Maryland and North Carolina will tie the previous record high.
Area for harvest in the U.S. is forecast at 76.6 million acres, unchanged from last month but up 3 percent from 2008.
For soybeans, since 1985, the USDA had increased the production estimate six times and all six years, the USDA increased production into the November production figure. This held true for 2009 as well. The USDA forecast a record large soybean crop and the highest yielding crop in history. The USDA also forecast a record Brazil soybean crop at 63 million metric tons.
The demand side, the USDA raised crush by 5 million bushels to 1.695 billion, raised exports by 25 million to 1.325 billion, raised residual usage by 2 million and lowered imports by 2 million. The net demand revision was a 26 million bushel increase from last month, partially offsetting the 69 million bushel increase in production, for a net increase in 2009/10 ending stocks of 40 million bushels to 270 million. This was also modestly higher than market expectations of 235 million.
The USDA resurveyed spring wheat producers after the September small grains report as the late harvest did not allow for an accurate survey of final production figures. USDA lowered the “other spring” wheat crop to 584 million bushels from 587 million bushels previously. The USDA revised the U.S. wheat crop to 2.216 billion bushels from 2.22 bb last month, but lowered exports by 25 mb, resulting in an ending stocks figure of 885 mb, the highest stocks in 10 years and the highest usage ratio, 42 percent, since 1987/88.
Corn analysis
Corn closed the week $.23 1/2 higher. As producers focused on finishing the soybean harvest, corn values were able to rebound.
With so little corn harvested, the trade has to believe that if farmers can harvest this crop, significant harvest pressure will eventually hit the market. Technically, corn has hit a 62 percent retracement level on harvest delays, which mandates producers increase their marketing efforts.
Soybeans analysis
Soybeans closed the week $.36 higher. As harvest has progressed, producers continue to report excellent yields. Strong demand has underpinned prices and producers are considering selling soybeans and re-owning with futures or options as there is little to no carry in the market to encourage producers to store soybeans.
The USDA reported U.S. soybean harvest jumped to 75 percent complete versus 51 percent last week, 91 percent last year and 92 percent average.
The weekly export sales report showed net sales of 1.27 MT were up noticeably from the previous week and up 82 percent from the prior four-week average. Increases were reported for China (961,200 MT, including 168,600 MT switched from unknown destinations and decreases of 147,600 MT), Japan (126,700 MT, including 54,000 MT switched from unknown destinations), Mexico (85,700 MT) and Canada (84,400 MT).
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.