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January USDA Report Recap

01/13/2014 @ 11:00am

After months of lower corn prices and what seemed like an eternity of negative outlook, corn futures showed a flicker of life on January 10 after that day’s USDA report came out with a touch of a friendly tone.  It was not enough to suggest that corn needs to go racing higher to $5.00, but it was enough to stop the recent bleeding.

The report came out and the news for corn was actually supportive.  2013/14 corn production was actually lower than pre-report estimates.  Harvested area for corn was raised 436,000 acres, but the estimated yield was lowered 1.6 bushels per acre to 158.8, reducing production 64 million bushels to 13.9 billion.

Projected corn use for 2013/14 was raised with feed and residual use projected up 100 million bushels based on September-November disappearance as indicated by the December 1 stocks estimate. Corn used to produce ethanol was raised 50 million bushels reflecting continued strong weekly ethanol production. A 50-million-bushel reduction in other food, seed, and industrial use offsets the increase in use for ethanol. Corn ending stocks for 2013/14 are projected 161 million bushels lower at 1.6 billion.

Also supportive news on report day, a follow up story emerged regarding China and their recent rejection of corn and DDG’s. In mid-December, China rejected some 10 shiploads of U.S. corn because it contained the MIR162 trait, also known as Agrisure Viptera, produced by Syngenta Ag. Rejection of about 2,000 metric tons of DDG soon followed, causing panic in the market and shipments to China came screeching to a halt in fear they would be rejected. That, in turn, caused a glut of product domestically and sent prices of DDG plummeting to the lowest levels in nearly two years. According to news reports, China has begun accepting some of the DDG shipments that had been placed in quarantine, with reports that more and more DDG would be accepted in coming weeks.

Turning to soybeans, today the USDA increased its soybean production estimate, boosting production to 3.289 bb from its previous projection of 3.258 bb. The USDA achieved this by increasing harvested acres to 75.87 ma from its previous 75.7 ma estimate and adjusted the national average yield to 43.3 bpa from 43.0 bpa. The USDA pegged soybean stocks as of Dec. 1 at 2.148 billion bushels, which is slightly smaller than the average pre-report estimate. It's the second-smallest soybean stocks figure since the 2003-04 marketing year.

The USDA tweaked its supply and demand table in response to its 31 mb upward revision in production. The crush was increased by 10 mb and exports were increased by 20 mb. This led to an unchanged ending stocks figure of 150 mb, about even with the average trade estimate, with an ending stocks-to-use ratio of 4.5%.

Globally, USDA now estimates Brazil will grow 89 mmt of soybeans, up 1 mmt, while Argentina production was left unchanged at 54.5 mmt.  Overall, the global ending stocks figure for soybeans came in at 72.33 mmt, up 1.71 mmt on larger global production. The stocks figure was higher than the range of pre-report estimates. It is this higher amount of soybeans globally that will keep the new crop prices under pressure for now.

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