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Shrinking Supplies and Demands (8/11/11)

August 11th, 2011

Chad Hart , ISU Extension Grain Marketing Specialist, provides a summary of the latest report from USDA.

USDA’s monthly set of updates was released this morning.  And with the 1st field-based surveys of the corn and soybean crops, the numbers have shifted quite a bit, coming in below pre-trade expectations.   On acreage, USDA resurveyed some areas of the country and found fewer corn harvested acres (down 500,000), soybean planted acres (down 200,000), and soybean harvested acres (down 500,000).  Most of these adjustments came from the Dakotas.

As we wrap up the 2010/11 marketing years, USDA made some changes to demand and ending stocks.  For corn, export demand was lowered 50 million bushels and ethanol demand was lowered 30 million bushels.  There was a partially offsetting increase other food, seed, and industrial use of 30 million bushels.  But the end result is an increase in the 2010/11 ending stocks to 940 million bushels, up 60 million from last month.  The 2010/11 season-average farm corn price held at $5.25 per bushel.  For soybeans, export demand was decreased 25 million bushels and crush demand was lowered 5 million bushels.  So 2010/11 soybean ending stocks come in at 230 million bushels, up 30 million.  But as with corn, the season-average price held steady, at $11.35 per bushel.

For 2011/12, corn yields are estimated at 153 bushels per acre.  That is down 5.7 bushels from last month and reflects the above average temperatures and below average precipitation much of the country faced in July.  The changes in acreage and yield bring expected production below 13 billion bushels, to 12.914 billion.  That is slightly below, but within the range of, pre-trade expectations.  Demand is expected to decline as well.  Feed demand was lowered 150 million bushels to 4.9 billion on higher corn prices and increased wheat feeding.  Ethanol demand was reduced 50 million bushels on lower projected gasoline consumption.  Export demand was lowered 150 million bushels.  The reductions in supply exceed the reductions in demand.  Thus, ending stocks are lower, at 714 million bushels.  And the projected season-average price is higher, with the midpoint at $6.70 per bushel, up 70 cents from last month.

For 2011/12 soybeans, projected yields were decreased by 2 bushels per acre to 41.4 bushels.  Combined with the acreage reduction, this led to a 169 million drop in expected soybean production to 3.056 billion bushels.  On the demand side, crush demand was reduced 20 million bushels.  Export demand fell 95 million bushels.  With demands still exceeding production, ending stocks are lowered to 155 million bushels.  The season-average price was raised, with a midpoint of $13.50 per bushel, up 50 cents from last month.

Over the past couple of weeks, the market has been trying to figure out which was having the greater impact, the continued economic malaise weakening demand or the weather weakening supply.  USDA numbers indicate Mother Nature is having the greater impact currently.

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