Corn takes a USDA hit

Corn takes a USDA hit

By: Mike McGinnis 09/12/2012 @ 7:25am

The U.S. farmers will raise slightly less corn than previously expected and a little less soybeans in 2012, according to the USDA Wednesday.

In its September Crop Production Report, the USDA raised the U.S. corn yield from 123.4 bushels per acre last month to 122.8 bushels per acre. U.S. 2012-13 corn production is estimated at 10.72 billion bushels vs. the average analysts estimate of 10.403 billion bushels and the USDA's previous estimate of 10.779 billion.

For soybeans, the USDA estimates a 2012-13 yield of 35.3 bushels per acre vs. the average analysts estimate of 35.5 bu./acre and the USDA's previous estimate of 36.1. The U.S. 2012-13 soybean production estimate is pegged at 2.634 billion bushels vs. the average trade estimate of 2.638 billion bushels and the USDA's previous estimate of 2.692 billion.

On 2012-13 U.S. harvested acres, the USDA left those estimates unchanged from a month ago. U.S. corn harvested acreage is pegged at 87.4 million acres and U.S. soybean acreage at 74.6 million.

Jason Ward, Northstar Commodity Investment Co. analyst says the Report is bearish for the corn market.

"This Report should put the top in for corn. The soybean market still looks bullish, with today's lower yield followed by more usage cuts to keep carryout in line. But, that soybean usage figure is still too low," Ward says.

For wheat, the Report is in-line with expectations, Ward says. "Look for funds to further reduce exposure to long corn," he says. They may switch to longer beans.  Seems like a better investment to be long beans vs. corn. Still have tremendous usage while corn usage is slowing."

Sal Gilbertie, Teucrium Inc. analyst, says this report shows the resilience of corn demand even in the face of increased global prices. "Corn supplies are adequate but remain historically tight. The fact that projected demand has actually increased slightly from last month means the market has adjusted to the higher price regime. Any price dip in corn as a result of this report will likely be met with healthy end-user buying, since demand is not falling even with higher market prices. 

Soybeans are still the real story of these reports, the balance sheet for soybeans is very tight, he says. "There is some demand destruction projected but ending stocks of old crop were reduced indicating shrinking supplies even as projected demand is reduced slightly. Global wheat supplies remain adequate," Gilbertie says.

Jack Scoville, PRICE Futures Group vice-president, says the report will prove to be bearish for the corn market and neutral-to-positive for beans.  

"Bigger-than-expected corn production is the big news here, and we have been hearing that the yields are not as bad as they could have been.  Ending stocks corn old crop up at least as much as expected as demand has in fact tailed off.  Overall, the picture presented by USDA is somewhat less dire than what the private guys have been saying.  Beans neutral and tight, and given the selling the market is rebounding.  Chart patterns could become very negative for corn after today on a medium to longer term," Scoville says.

As a result of today's USDA estimates for corn usage, ethanol use will account for 26% of the total supply, while feed use accounts for 46%. Projected exports were lowered slightly from last month to 1.25 bbu.

Discuss the corn, soybean and wheat markets in Marketing Talk.