USDA Lowers Corn Production Estimates

by: T. Marc Schober

The USDA updated the U.S. and World balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates (WASDE) report yesterday (click here for report). WASDE reports in the summer are a barometer of overall world demand, forecasted production, and inventory adjustments. In June, U.S. ending stocks for 2011/12 were revised lower for corn and wheat, but increased for soybeans.


Bullish news for U.S. corn continues midway through 2011, as the 2011/12 U.S. projection for corn production and ending stocks were decreased by 305 and 205 million bushels to 13,200 and 695 million bushels, respectively. Current USDA projections rank this corn crop as the largest corn crop in U.S. history, but ending stocks are the lowest since 1995.

The USDA maintained its forecast for corn yields and beginning stocks at 158.7 bushels per acre and 730 million bushels, respectively, but lowered its planted acreage forecast (to 90.7 million acres, from 92.2 million acres), and its harvested acreage forecast (to 83.2 million acres, from 85.1 million acres).

Production revisions were the result of planting delays through early June in the eastern Corn Belt and northern Plains. The USDA believes this reduction in planted area will more than offset likely gains in the western Corn Belt and central Plains where planting was ahead of schedule by mid-May. The harvested area is lowered 1.9 million acres to 83.2 million with the additional 400,000 acre reduction reflecting early information about May flooding in the lower Ohio and Mississippi River valleys and June flooding along the Missouri River valley.

Corn ending stocks are projected 35 million bushels lower than beginning stocks, indicating a stocks-to-use ratio of 5.2% compared with the 2010/11 forecast ratio of 5.4%. The 2011/12 season-average farm price for corn is projected at a record $6.00 to $7.00 per bushel, up 50 cents on both ends of the range.

World corn production was slightly lowered to 866 million metric tons from May’s forecast of 868 million metric tons; decreases in U.S. production were offset by increases in Chinese production. Global corn ending stocks however were reduced by 13% to 112 million metric tons; lower usage was forecasted in the U.S., but was off by increases in expected Chinese demand.


The USDA raised its estimate of ending stocks for the 2011/12 crop to 190 million bushels from its May estimate of 160 million bushels. This was the result of reductions to the estimates of ending stocks for the 2010/11 crop and soybean exports for the 2011/12 crop by 10 and 20 million bushels, respectively. Demand erosion for the 2011/12 U.S. crop is anticipated from an increase in the recently harvested Brazilian soybean crop.

The U.S. season-average soybean price for 2011/12 is projected at $13.00 to $15.00 per bushel, up $1.00 on both ends of the range.

Global soybean production and ending stocks were each lowered marginally from the May report. While production and usage levels have remained consistent with estimates, we remain focused on the development of the U.S. soybean crop, which represents 34% of world production and import demand from China.


U.S. 2010/11 wheat ending stocks were lowered to 809 million bushels from 839 million bushels. This estimate is based on lower U.S. imports and higher than expected exports.

The USDA raised its forecast of 2011/12 wheat yields to 43.1 bushels per acre, from 42.5 bushels per acre, but lowered its planted and harvest acres by 300 and 220 thousand acres, respectively. It also left U.S. wheat usage and exports for 2011/12 unchanged from previous estimates. These estimates project ending stocks 15 million bushels lower at 687 million bushels, but remain above the 10-year average.

Total world wheat production was estimated at 645.82 million bushels, down from December’s estimate of 646.51 million bushels. The decrease was due to heavy floods in Australia and difficult production in Kazakhstan, partially offset by increased production in Argentina and Brazil.

The 2011/12 season-average farm price for all wheat is projected at a record $7.00 to $8.40 per bushel, up 20 cents on both ends of the range, reflecting both tighter domestic supplies and higher expected corn prices. The forecast 2010/11 wheat farm price is also raised this month, up 5 cents per bushel to $5.70 per bushel.


As grain stocks continue to decline into the fall, we are closely monitoring demand and basis levels of old crop corn. Post July corn is at $7.90 per bushel and is poised to close at an all time contract high. If demand levels remain consistent, prices of commodities will continue their climb higher toward harvest.

With a poor start to the growing season, the next two months are critical across much of the Midwest, as corn plants are beginning to determine their yield potential. The USDA has set large production goals and producers are going to have to rely on near perfect growing conditions and proper management techniques to assist them in achieving these levels.

Pay attention to crop conditions, demand and weather patterns this summer, as grain prices could continue their historical climb higher.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.