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WASDE News Sends Corn Contracts Limit-down

posted on January 13, 2012


America's retailers enjoyed a record 2011 and their first $400 billion sales-months ever.

According to the Commerce Department, retail sales increased 0.1 percent in December to a seasonally adjusted $400.6 billion.  The improvement marked the second consecutive month in which sales exceeded $400 billion.

For all of 2011, retail sales totaled a record $4.7 trillion. That's up nearly 8 percent over 2010, reflecting the largest gain since 1999. 

Much of December's improvement was driven by a 1.5 percent spike in auto sales.  Stripping out the volatile automobile sector, sales actually fell 0.2 percent... the first such drop since May of 2010.  But most of that decline was due to falling gasoline prices.   Excluding gas stations, overall retail sales rose 0.3 percent in December.

Against a backdrop of cautious optimism for a domestic economic rebound, government analysts also released their latest estimates this week on global agricultural supply and demand.  And notions of increasing global supplies of corn had bearish implications for grain prices.   

WASDE News Sends Corn Contracts Limit-down

The Agriculture Department’s latest estimates on U.S. corn production, consumption and ending stocks were little changed from last month’s report.   Yields were projected half-a-bushel higher to 147.2 bushels per acre.  The increase puts total domestic production for the 2011 season at 12.358 billion bushels – the fourth largest on record.

But the big story was in world corn ending stocks. A drop in global demand increased the amount of corn available to users by 1 million metric tons. Analysts are expecting coarse grains to be tight despite the new found bounty.
The reaction by the trade was bearish. Even with recent advances, corn futures prices plunged limit-down on both nearby and deferred contracts on the news.

According to the report, U.S. farmers put nearly 300 million fewer bushels of soybeans in the bin this year.  Despite the reduction, USDA prognosticators are calling the 2011 harvest at 3.056 billion bushels.

Global and domestic supplies of soybeans are judged as adequate by some private grain analysts who see no imminent supply problem. But in looking to the future many say strong demand and merely adequate supply indicates the need for increased production.

Despite a lower yield, U.S. ending stocks were pushed 45 million bushels higher over last month to 275 million bushels. Private analysts are still calling the number tight by historical comparison.

The report pegged global soybean production lower at 457.4 million tons, down 300,000 bushels over last month.
The trade’s response to the news was bearish as the nearby and deferred contracts lost 20 cents in the fray.

U.S. wheat acreage was increased 8 million acres to 54.4 million acres but production is expected to be lower at 2.1 billion bushels. And with millers grinding fewer bushels for flour domestic ending stocks were increased to 870 million bushels. Global wheat supplies also are projected 2.7 million tons higher at 637 million metric tons.
Based on the report, U.S. and world wheat supplies were projected as adequate by private analysts. Nevertheless prices for the nearby and deferred contracts fell nearly 35 cents.


Tags: corn ending stocks limit-down soybeans WASDE wheat