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Drought Puts Damper on U.S. Corn Crop

posted on September 14, 2012

Soybean prices rallied late this week after the Agriculture Department released its latest estimates on supply and demand.

To almost no one's surprise, USDA reduced its "guesstimate" on U.S. corn and soybean production. But the degree of the adjustment surprised some traders.

Drought Puts Damper on U.S. Corn Crop

As expected, the Agriculture Department predicted this week that U.S. farmers will produce considerably less grain than last year. 

According to USDA, total U.S. corn production will amount to just 10.7 billion bushels... down 13 percent from 2011.  If realized, that would be the smallest corn harvest since 2006. The government pegs the average yield at 122.8 bushels per acre, which would be the smallest yield in 17 years. 

Soybean estimates also were curtailed. The government now calls for total U.S. production of 2.63 billion bushels down 14 percent from 2011.  The average soybean yield is expected to decline to 35.3 bushels per acre…down 15 percent from last year.

Turning to its monthly supply and demand estimates, USDA actually INCREASED corn beginning stocks.  Despite lower yields in the Corn Belt, the government predicts the early harvest will boost carry in, resulting in corn ending stocks of 733 million bushels.

Analyzed as a percentage of demand, the numbers add up to a razor-thin U.S. stocks-to-use ratio of 6.5 percent. That would be the tightest corn stocks-to-use ratio in 17 years, leaving virtually no cushion for increased demand or production shortfalls.

Soybean supplies also reflect the impact of drought. USDA’s August estimate on domestic ending stocks was unchanged at 115 million bushels… their lowest level in 9 years.

An accompanying U.S. soybean stocks-to-use ratio of 4 percent is small historically, and leaves little room for crop adversity.   

Tags: agriculture corn news production soybeans stocks USDA WASDE wheat


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