The USDA projected corn yields in 2012 have dropped 12% month-to-month, the largest monthly reduction in the last decade, due to the worst drought in the Midwest since 1988. As expected, the USDA offset part of the yield loss with decreased feed and ethanol demand for corn. The July WASDE also estimated that soybean yields have deteriorated by 3.4% to 40.5 bushels per acre.
Due to the rapid decline in U.S. corn conditions, average yield for 2012 has been reduced by 20 bushels per acre to 146 bushels per acre. Total U.S. production has been lowered 1.8 billion bushels from June's report, equal to the total annual production of Mexico and Argentina combined!
2012/13 U.S. corn usage has been projected down 650 million bushels due to higher prices and reduced supplies. U.S. corn usage to produce ethanol in 2012/13 was also projected 100 million bushels lower. Corn exports were projected to decline by 300 million bushels as U.S. shipments will be limited due to higher prices, tight supplies, and competition from South America
2012/13 ending stocks were reduced to 1.2 billion bushels, a 698 million bushel reduction from last month. The 2012/13 projected range for season-average corn prices was increased slightly to $5.40 to $6.40 per bushel.
Global coarse grain supplies in 2012/13 were estimated to decrease 47.6 million tons mostly due to the reduction in the U.S. corn crop. Partly offsetting the reduction were increases in production in EU-27 and Canada.
This year's drought conditions are the worst since 1988 when production fell 31% from the previous year and crops along the eastern Corn Belt have already been damaged beyond repair. We will keep a close eye on weather patterns as we see weather as the key driver for the grain complex.
2012/13 U.S. soybean production has been projected down 155 million bushels, to 3.050 million bushels. Average soybean yield was projected at 40.5 bushels per acre, a 3.4% drop from last month due to lack of rain and hot weather across the Corn Belt.
2012/13 U.S. soybean exports were decreased this month by 115 million bushels to 1.37 billion bushels. U.S. ending stocks for 2012/13 were projected down 10 million bushels, to 130 million bushels. The 2012/13 average soybean price was projected at $13.00 to $15.00 per bushel, a $1.00 increase on both ends of the range.
2012/13 U.S. wheat supplies were increased this month by five million bushels due to increased beginning stocks. Production in 2012/13 has been reduced by 10 million bushels due mainly to the reduction in winter wheat production.
U.S. wheat exports for 2012/13 were projected 50 million bushels higher due to the lack of competition from the Black Sea exporters. The season average wheat price for 2012/13 was projected $0.60 higher on both ends at $6.20 to $7.40 per bushel.
Global wheat supplies for 2012/13 were decreased by 5.1 million tons. Global production for 2012/13 was lowered as there were reduced crop prospects for several exporting countries including Russia, Kazakhstan, and China.
Although this report is important and showed an extreme change in yield prospects, it will be looked at and quickly thrown to the side; the market will change its focus back to the weather. The weather in the Corn Belt will dominate the headlines as sustained hot and dry weather will continue to deteriorate crop conditions and power the grain complex.