High corn and bean production drives market prices lower

Corn Supply, Demand, Price

• Corn production in 2013 is projected at a record 14530 billion bushels, up 3,750 million or 35 percent from the drought-reduced 2012 crop. The 2013/14 corn supply is projected to rise 28 percent to a record 15,187 million bushels.

• Harvested area is projected at 88.8 million acres, up 1.4 million from 2012 and the highest since 1933. Although planted area is projected down slightly on the year, harvested area expands with a return to more normal yields, more normal abandonment rates, and a reduction in area harvested for silage.

• The national average yield is projected at 163.6 bushel per acre, up 40.2 bushels from last year’s drought ravaged yield. A return to normal summer weather supports a sharp recovery for corn yields as fall and winter dryness have little correlation with conditions during the following growing season and eventual yield outcomes. The trend projection is based on a yield model that accounts for summer precipitation and temperatures in determining expected yields.

• Total corn us is projected at 13.010 billion bushels, up 1.773 billion from 2012/13.  Feed and residual will be 5.400 billion, with much of the 950 million increase expected in residual disappearance.  Food, seed, and industrial use will be 6.110 billion bushels, with ethanol requiring 4.675 billion bushels.  The decline in ethanol production stems from fewer miles driven and increased mileage efficiency.  Exports will be up 600 million to 1.5 billion bushels.  Ending stocks will be 2.177 billion.

• Favorable forward pricing opportunities are expected to provide some support for prices received by producers early in the 2013/14 marketing year, but harvest time cash prices are expected to fall to near $4 per bushel. The season-average farm price is projected at $4.80 per bushel

Soybean Supply, Demand, Price

• Soybean supplies for 2013/14 are projected at 3,545 million bushels, up 11 percent from 2012/13 as larger soybean production more than offsets lower beginning stocks and projected imports. Soybean production is projected 13 percent higher at 3,405 million bushels mostly reflecting yield gains above last year’s drought-reduced level.

• The national average soybean yield is projected at 44.5 bushels per acre, up 4.9 bushels from last year’s drought-reduced level. The trend projection is based on a weather-adjusted yield model that accounts for temperature and rainfall during the growing season.

• Soybean domestic use is projected at 1,795 million bushels, up 3 percent from 2012/13. Crush is projected to expand by 45 million bushels to 1,660 million—supported by more competitive soybean meal exports and a moderate increase in domestic demand. Based primarily on expansion in the pork and poultry sectors.

• U.S. exports are projected to rise to 1.5 billion bushels in 2013/14 on larger supplies and increasing foreign demand, boosting the U.S. share of global trade. However, U.S. exports will likely face stiffer competition from South America, where exportable supplies will be much  higher than in 2012/13. Foreign demand will be driven by China, which typically accounts for more than half of world imports.

• U.S. soybean ending stocks for 2013/14 are projected at 250 million bushels, the highest since 2006/07 and double the level projected for 2012/13. Despite a 7-percent increase in total use of soybeans, the ending stocks-to-use ratio of 7.6 percent would be above the 5-year average of 5 percent and the highest in the past 7 years. With a sharp increase in production and ending stocks and lower corn prices, the season-average farm price for soybeans is projected at $10.50 per bushel.

Summary:

Increased production of corn, even with increased use, will generate large carryover stocks and low market prices.  Increased production of soybeans, even with increased use, will generate large carryover stocks and low market prices.  Production of both corn and soybeans assumes normal weather patterns.

Source: FarmGate blog