Monday, January 12, 2009

Expect corn output to rise, use and price to fall, USDA says, contrary to market analysts' forecasts

Confounding farm market analysts, the U.S. Department of Agriculture estimated today that U.S. corn production and stocks of the crop would increase in the current marketing year, which ends Aug. 31. USDA also said expected use of corn would decline because of reductions in "livestock feeding, ethanol use and exports," writes Janie Gabbett of MeatingPlace, a news site for the meat industry.

"Market analysts had expected USDA to decrease corn production and expected a much smaller increase in ending stocks," Gabbett reports. The main factor in the forecast for decreased use was ethanol, because producers are losing money. "The projected season-average farm price for corn was lowered 10 cents on each end of the range to $3.55 to $4.25 per bushel."

Gabbett also reports on USDA forecasts for soybeans. While exports are expected to rise on strong demand from China, the projected bean crush is down because of reduced domestic demand. "The U.S. season-average soybean price range for 2008-09 is projected at $8.50 to $9.50 per bushel compared with $8.25 to $9.75 per bushel last month." (Read more)

Jeff Caldwell of Agriculture Online writes, "All eyes now turn to South America, where weather conditions will have a lot to do with crop size there and, in turn, market prices here. And, soybeans will be leading the charge, analysts say." (Read more) For the full USDA crop forecast, click here.

1 comment:

Ant said...

Can´t seem to figure out where the USDA got their projections. "Some factors not fully evaluated in this report....."

Information I have puts the US corn production a 'little' below what was stated in the report. Plus, I haven’t heard any evidence of decreased meat production from my homeboys in Nebraska and Texas. (I sell a little Limousine/Nelore semen.)

Hopefully the USDA is right about volume because you guys will make out good if what I am seeing down here on my farm holds true.

My place resides just across the border from Brazil on the Paraguayan side. (This means my point of view is probably valid for Paraguay and the Brazilian states of Mato Grosso de Sur + Mato Grosso. I also have quite a few friends in Argentina that share my thoughts.)

As far as corn goes, many of us are looking at the prospect of not planting at all after the soybean harvest. Some of us might increase wheat acreage a little. At present our fertilizer costs are so high as to make corn an unviable option. Also, since fuel prices in all three countries are pretty much state controlled, we are seeing no reduction in diesel costs that accompany the crude prices. Basically we are still paying the same as last year at this time. If this persists, world stocks will be well below projections. This also means that a lot of ‘buys’ will need to be shifted to the US market. It might be advantageous for US farmers to hold on to local stocks for a while if possible.

In relation to soybeans, I read the CBOT/CME analysis daily and never cease to be wondered how they can get so much bad information in a few paragraphs. The USDA seems to have followed suit. Many of us were betting on more precocious strains. We really got hit hard with drought early on and the rains we are getting now won´t help a lot of us out as we would basically be at R7-R8. Also, the rains aren’t quite as good as being reported. Maybe CBOT and the USDA should try using wunderground (a little better) because the scattered thundershowers we are having are heavy – for about 90 seconds. Temperatures are somewhat more moderate however. Maybe Punxsutawney Phil’s cousin João the capivara was half right.

While not a pessimistic as some, I calculate the South American net soy production about 30-35% off of last year. The US attachés down here keep trying to convince the USDA about the severity of crop loss but they don’t want to hear it and the attachés usually buckle to “political pressure” and moderate their numbers.

Greetings from Pedro Juan Caballero, Py.