USDA’s quarterly grain stocks reports over the past two years have caused “plenty of surprises” with the most recent survey report yesterday delivering “another curve ball at the market,” according to today’s “Daily Livestock Report.”
Ahead of the USDA report, analysts were expecting December 1 corn and residual stocks to be 9.391 billion bushels. However, the USDA report put overall corn stocks at 9.641 billion bushels. The higher-than-expected stocks imply significantly smaller feed use compared to a year ago since ethanol production was particularly strong during the quarter and offset any declines in corn exports, the USDA report said.
Grain analysts estimate that feed corn and residual use for the September-November quarter was down 9 percent compared with the previous year, a significant number given higher numbers of hogs and cattle on feed. Chicken numbers are down, the report said, and that situation has had an impact.
Other factors are also at play, namely a larger supply of DDGs going into the domestic supply rather than exports. USDA’s balance table for corn currently has feed and residual corn use for 2011-12 at 4.6 billion bushels, 4 percent below levels a year ago. But, with higher ethanol production (hence more DDGs) and burdensome wheat supplies (more wheat feeding), it remains to be seen if the feed and residual number will be adjusted lower in the coming months, according to the USDA report.
In its “World Agricultural Supply and Demand Estimate” report, USDA increased corn production for 2011 to 12.358 billion bushels, up 48 million bushels from its December report. Another 100,000 acres of corn was added to the harvested corn acres and the average yield was increased by 0.5 bushels to 147.2 bushels per acre. For 2011-12, exports of corn were increased by 50 million bushels so the ending carryover was trimmed by 2 million bushels to 846 million bushels, 6.7 percent of total corn usage for this crop year.
In a related report from AgWeb.com, analysts predicted that, despite the bearishness of USDA’s reports, expectations are for roller-coaster prices to continue. “I think we’ll see extremely volatile grain prices moving ahead over the next couple of years,” Terry Roggensack, Hightower Report, said. “You could make the case that a large 2012-13 U.S. corn crop will alleviate world tightness on corn,” he added. But, he says, a case could also be made for continued tightness in the world corn market. “USDA did not address potential losses in South American corn,” Roggensack said. Many analysts anticipate a loss of between 12 million and 16 million metric tons of corn this year in South America, but USDA only raised U.S. corn exports by 50 million bushels.
Some analysts expect U.S. corn farmers to plant 3 million more acres to corn this year. Coupled with an average yield, 3 million additional acres would mean U.S. corn production could increase by 50 million tons. “With normal weather in the United States this coming growing season, tightness in the word situation would be alleviated,” Roggensack noted. But, there is upside potential as well. Drought has expanded into the northern and eastern Corn Belt. Also, if China, which has increased corn production nine years in a row, runs into bad weather that negatively impacts the size of its corn crop, world corn prices could once again increase. “And if China continues to expand (economically), it will need more milk, more cattle, and a lot more hogs,” says Roggensack. “We are not in a burdensome situation (globally) in any of the grain markets with the exception of wheat,” he concluded.
