Milling & Baking News - August 21, 2012 - 22

Grain Market Roundtable 

Smallest corn crop in six years dictates direction for other grains
Continued from Page 1

projection of a record 14,790 million bus. “I think this is the largest number we will see for this year’s crop,” said Paul Meyers, chief agricultural economist, Foresight Commodity Services, Inc. “We could lose another 700,000 bus.” He suggested U.S.D.A. numbers for yield, harvested area and consequently production, were too high. Based on Aug. 1 conditions, the U.S.D.A. forecast the average 2012 corn yield at 123.4 bus an acre, down 23.8 bus, or 16%, from 147.2 bus an acre in 2011 and the lowest since 113.5 bus an acre in 1995. The yield estimate was down 22.6 bus from the non-survey July projection of 146 bus an acre and down 42.6 bus, or 26%, from the department’s initial projection in May of 166 bus an acre. The U.S.D.A. noted scarce rainfall and record-breaking temperatures in June, followed by dry weather and “brutally hot” temperatures in early

July resulted in a rapid decline in corn conditions. U.S.D.A. condition ratings aggregated for the 18 largest corn growing states on July 29 (about the time of the crop survey for the Aug. 10 Crop Production report) were 24% good to excellent, 28% fair and 48% poor to very poor, compared with 62% good to excellent, 24% fair and 14% poor to very poor a year earlier. The ratings declined slightly in early August but have since leveled off as the weather ﬁnally moderated. As crop condition ratings continually declined, corn futures prices soared more than 50% from mid-June to late July, setting a record high of $8.49 a bu in the December contract on Aug. 10. Harvested area was forecast at 87.4 million acres, down 2% from 88.9 million acres in the previous forecast, which was based on U.S.D.A. June Acreage report numbers, but up 4% from 84 million acres in 2011. If realized, harvested area still would be the highest since 1933. Indicated abandonment of just over 9%, (based on planted area of 96.4 million acres — the highest since 1937 — and harvested area of 87.4 million acres) was slightly above the usual 8% to 9% and considered too low by some analysts as a greater number of drought-ravaged acres become unproﬁtable to harvest. “By the time it’s all done, we may see harvested area down 3 million to 4 million acres from the June Acreage report,” Mr. Meyers said. “I think the U.S.D.A. didn’t capture all of the abandoned acres.” That would be 1.5 million to 2.5 million acres below the U.S.D.A.’s Aug. 10 number, which was down only 1.5 million acres from the Acreage report, with an abandonment rate of 11% to 12%, which is more in line with severe drought years. Such a drastically lower-than-expected corn crop means less supply for all use areas, as well as stock levels. U.S. corn carryover on Sept. 1, 2013, was projected in the Aug. 10 WASDE at 650 million bus, down 533 million bus, or 45%, from 1,183 million bus in July and down 371 million bus, or 36%, from an upwardly revised 1,021 million bus estimated in 2012. The U.S.D.A. 2013 corn carryover number

was near the average of pre-report trade expectations. Mr. Meyers suggested 2013 carryover may fall to historic lows around 550 million bus as the crop shrinks further. Total supply for 2012-13 was projected by the U.S.D.A. at 11,875 million bus, down 2,028 million bus, or 15%, from July and down 1,636 million bus, or 12%, from 13,511 million bus in 2011-12. Total use in 2012-13 was projected at 11,225 million bus, down 12% from 12,720 million bus projected in July and down 10% from 12,490 million bus estimated in 2011-12. “Total corn supply has been less than the previous year’s total use only two other times in the last 60 years,” Mr. Meyers said, noting similar situations in 1974-75 and 1995-96. Projected feed and residual use in 2012-13 was projected at 4,075 million bus, down 725 million bus, or 15%, from 4,800 million bus in July and down 475 million bus, or 10%, from 4,550 million bus in 2011-12. Food, seed and industrial use was projected at 5,850 million bus, down 470 million bus from July (including corn for ethanol at 4,500 million bus, down 400 million bus, and food and seed use at 1,350 million bus, down 70 million bus from July), and down 540 million bus from 6,390 million bus in 2011-12 (including corn for ethanol down 500 million bus from 2011-12 and food and seed use down 40 million bus). U.S. corn exports in 2012-13 were projected at 1,300 million bus, down 300 million bus, or 19%, from 1,600 million bus in July and down 250 bus, or 16%, from 1,550 million bus the previous year. The U.S.D.A. projected the average price paid to farmers for corn in 2012-13 to range from $7.50@8.90 a bu, up sharply from $5.40@6.40 in July and compared with $6.20@6.30 in 2011-12. “We have to ration demand, but at what price,” Mr. Meyers said. “December corn futures could go to $9 a bu between now and the end of November if the crop gets smaller and carryover declines further.” Despite the recent pullback from record highs, he expects corn futures prices will trade in the $8@8.50 a bu range in coming months. If corn prices approach $9 a bu, there
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