The USDA updated the U.S. and world balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates report today. No major changes in December’s report, but the USDA did lower expected prices for commodities, including a 30 cent reduction for corn prices in 2011/12.
Slightly bearish news from the USDA as world corn production increased to 867.5 million tons despite the U.S. production decline of 3.5 million tons year-to-year. The increase in world production was due to an increase in Chinese production by 7.3 million tons. The Chinese increased planted acres, yield estimates increased by 3%, and favorable weather conditions across China helped plant growth. This year's global crop is still on pace to be the third largest on record due to elevated planted acres.
Global corn supplies for 2011/12 are projected 7.4 million tons higher, primarily due to the increase in China’s corn production. Estimated U.S. ending stocks for 2011/12 were increased by 5 million bushels to 848 million bushels due to a decrease in domestic corn use and an increase in imports of oats. U.S. feed and seed usage was decreased by the 5 million bushels. USDA decreased the forecasted season-average farm price by $0.30 to $5.90 to $6.90 per bushel.
China should continue to import corn as their increased production still will not meet their increasing demand. The Chinese will continue to set the hypothetical price floor for the global grains market.
Domestic soybean exports decreased by 25 million bushels to 1.3 billion bushels due to a slow pace of shipments, outstanding sales through November, and strong export competition from South America. The decrease in exports resulted in higher ending stocks of 230 million bushels, up 35 million bushels from last month. The U.S. season-average price range for 2011/12 was projected at $10.70 to $12.70 per bushel; a $0.90 decrease on both ends of the range.
Global soybean production for 2011/12 increased by 0.3 million tons to 259.2 million tons due to increased production in Canada and India.
U.S. wheat ending stocks were projected 50 million bushels higher due to reduced prospects for exports of Hard Red Winter, Soft Red Winter, and White Wheat. The reduction in U.S. exports was due to large supplies in major exporting countries and strong domestic prices. The season-average price is projected at $7.05 to $7.55 per bushel compared with $7.10 to $7.75 last month.
Global wheat supplies for 2011/12 are projected 9.3 million tons higher with larger beginning stocks in Australia and Argentina, and a 5.7 million ton increase in global production.
The grain markets will be closely watching Chinese imports over the next few months, and we believe China will provide a price floor for the global grain markets through strategic purchases. We expect China may also increase 2011/12 imports to above 5 million metric tons.