The USDA September WASDE and Crop Production reports confirmed that farmers are likely to harvest the eighth-largest corn crop on record this fall, despite enduring the worst drought conditions in more than 50 years. This morning’s reports projected an average corn yield of 122.8 bushels per acre (bpa), above analysts’ pre-report expectation of 120.5 bpa. The projected total crop size of 10.73 billion bushels (bbu.) also came in above the average expectation of 10.4 bbu. and is down less than 0.5 percent from the August estimate. Total supply for 2012/13 is estimated at 11.98 bbu., up slightly from the August estimate due to an increase of 160 million bushels in carry-in.
On the demand side, USDA increased 2012/13 livestock feed demand to 4.15 bbu., up 75 million bu. from last month’s report. Corn use for ethanol and co-products was unchanged at 4.5 bbu. Because approximately one-third of every bushel of corn used for ethanol returns to the feed market as distillers grains, feed use will account for approximately 5.5 bbu. in 2012/13 on a net basis, compared to net corn use for ethanol of 3.15 bbu. Thus, on a net basis, ethanol use will account for 26 percent of the total supply, while feed use accounts for 46 percent. Projected exports were lowered slightly from last month to 1.25 bbu. Meanwhile, 2012/13 carry-out was raised to 733 million bu., up 13 percent from last month’s projection of 650 million bu. The increase in 2012/13 carry-out is explained by higher carry-in that more than offsets slightly lower production and slightly increased demand. Average prices were reduced 30 cents/bu to $7.90/bu.
Globally, USDA is still projecting the second-largest corn crop in history. Production in Argentina is up more than 30 percent over last year, while Mexico increased output 19 percent, South Africa 17 percent, Canada 9 percent, and China 4 percent. At 2.71 billion metric tons, USDA is also expecting the total 2012/13 grain supply (coarse grains, wheat, and rice) to be the second-largest ever. The U.S. ethanol industry is expected to use just 2.9 percent of the global grain supply in 2012/13.
“This report should bring some calm and increased certainty to the markets,” said Renewable Fuels Association President Bob Dinneen. “With each passing day, we have a better sense of the size of this year’s crop. We are thankful that it appears very little additional damage was done to the corn crop in late August and early September. It is truly remarkable that even in the face of the worst drought in 50 years and the hottest July in recorded history, U.S. farmers were able to produce a corn crop of this size. This morning’s report also clearly shows that all end users are sharing in the pain and participating in demand rationing. The notion that the ethanol industry is somehow insulated from demand rationing because of the RFS is shown to be patently false, with ethanol use projected down 10 percent from last year and feed use reduced by less than 6 percent.”