CME: WASDE Made Fewer Changes Than Expected

US - After all of the uncertainty that has surrounded South America’s crop year, USDA’s March World Agricultural Supply and Demand Estimates made fewer, and generally smaller changes than were expected to the sizes of 2012 Brazilian and Argentine crops, write Steve Meyer and Len Steiner.
calendar icon 12 March 2012
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Friday’s report was called neutral by most and was certainly not as bullish as many expected. CME pit-traded corn futures still manages to gain 7 to 9.5 cents/bushel for old crop corn and 4 to 6 cents/bushel for new crop 2012 corn. Old crop soybeans were virtually unchanged in Friday’s trading with the nearby March and May contracts losing $0.75/bu., the deferred old-crop contracts gaining about 1 cent/bu. and new crop beans gaining 3.75 to 5.75 cents/bu. That last move is, in our opinion, a continuation of the acreage battle we discussed in yesterday’s DLR. Old crop meal lost $2.80 to $4.60 per ton on Friday while new crop declined generally less that $1/ton. Bean oil surged higher with nearby March oil gaining $0.93/cwt., newcrop oil gaining $0.81/cwt. and contracts between the two gaining $0.85 to $0.88.

Electronic trading over the weekend has seen slight declines in corn futures and slight gains in soybean futures. Meal and oil are virtually unchanged from Friday’s close.

USDA made no changes in their supply and utilization (S&U) forecast for U.S. corn. Projected corn carryout stocks remained at 801 million bushels or 6.3% of total usage. USDA did narrow its predicted range for the national weighted average farm price by 10 cents on each end to $5.90—$6.50. The mid-point of the range is $6.20/ bushel, the same as last month and 18% higher than last year’s $5.18/bushel.

They also made no changes in the soybean S&U projections. Carryout stocks there remained at 275 million bushels or 9.1`% of total usage. But USDA raised both ends of its forecast soybean price range by 30 cents/bu. That range is now $11.40-$12.60/bu. The midpoint of that range ($12.00) is 6.2% higher than the average farm price for 2010-11. USDA’s only major change in the soybean forecasts was a $20 increase in both ends of the meal price forecast range. That change is mainly “catching up” to a market that has gained $30/ton since mid-February and, in spite of last weeks mild selloff, show little sign of having reached a top.

The changes that moved markets some on Friday were primarily those made for South American soybean crops. The Argentine crop was reduced 1.5 MMT from February’s 48 MMT while Brazil’s crop was trimmed 3.5 MMT to 68.5 MMT. Those changes were the main driver in a reduction of projected world soybean supplies from 251.5 to 245.1 MMT (3.5%) from the February estimates and would put the ‘11-’12 crop 7.3% smaller than one year earlier. It also projected world carryout stocks of soybeans to 57.3 MMT, 5% smaller than one month ago and 16.7% smaller than ‘10-’11 carryout stocks.

Changes to USDA’s projected world corn S&U projections were relatively minor. Argentina’s estimated production was reduced form 34.5 MMT in February to 34 MMM in this report. South Africa’s crop was reduced by 0.5MMT as well but Brazil’s estimated corn crop was increased by 1 MMT from February to 62 MMT. Sum all the changes up and you get a slight (0.1%) INCREASE of USDA’s projection for world corn production. Higher usage, though, results in a 0.82MMT (0.7%) reduction of forecast ending stocks. The new figure of 124.53 MMT is 3.5% lower than last year and represents a yearend stocks/use ratio of 14.3. That compares to 15.3 last year.

USDA also adjusted it forecasts of U.S. meat and poultry output for 2012. The most notable changes in the March WASDE report were:

  • Beef production was lowered by 80 million pounds (about 0.3%) from the February forecast level. Output is now expected to be 25.145 billion pounds, carcass weight — 4.4% LOWER than in 2011 as smaller calf crops impact total slaughter.
  • A 145 million pound increase in beef imports which are now forecast to be 2.235 billion pounds, 8.7% higher than in 2011. High U.S. beef prices, a slightly stronger dollar and lower cow slaughter—-and thus tighter grinding beef supplies — will be the drivers of this increase.
  • These two changes plus a small adjustment in beginning inventories put total U.S. supply and use 73 million pounds (0.3%) higher than was forecast in February.
  • USDA made relatively few and only minor changes in most pork forecasts. They did increase forecast exports by 85 million pounds (1.7%) from the February levels. Should the March export forecast of 5.2 billion pounds carcass weight be achieved, it will put 2012 exports 1.6% higher than the record level of 2011 and would put total U.S. exports at 22.4% of total carcass – weight production. Readers should note that data released by the USMEF each month uses product weights and includes variety meats and sausage casings.
  • An INCREASE of 198 million pounds (0.6%) for forecast broiler output. That would put 2012 broiler output only 2.4% lower, yr/yr even though production has been down 6.1% YTD (below) and egg sets and chick placements are still –5.5% and –3.9% YTD.
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